February 01, 2017 / 14:27 IST
Bharti Infratel (BHIN) recorded stellar tenancy growth inQ3FY17 with 6,139 additions (Q2: 2,393). The growth was driven by accelerated ramp-up in networks by Top 3 incumbents –Bharti, Idea and Vodafone. Management shared that Reliance Jio has also begun to add materially to new additions. Average tenancy ratio surged to 2.24x (Q2: 2.21x), with closing ratio at 2.27 (Q2: 2.21x). This led to higher capex at Rs 6.8 bn (Q2: Rs 5.1 bn). PAT was lower by 20% QoQ owing to lower other income from mark-to-market of investments.
OutlookWe expect 0.29x incremental tenancy over FY16-18 and 8% CAGR in total tenancies to drive 9% /16% CAGR in EBITDA /PAT. We build in slight uptick in our capex assumptions for upcoming opportunities – smart cities, wi-fi etc. Our DCF-based TP of Rs 425 implies an upside of 21% (CMP of Rs 351). The stock trades at 23x FY17E and 22x FY18E EPS of Rs 15.2 and Rs 16.3. Maintain BUY.
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