Buy Bharti Infratel; target of Rs 470: Emkay

Emkay's research report on Bharti Infratel Consolidated revenue was at Rs31.6bn (+2.2% qoq and +7.3% yoy) and EBITDA stood at Rs14.3bn (+6.1% qoq and +6.6% yoy) with EBITDA margin of 45.1% (+164bps qoq and -31bps yoy). PAT at Rs6.6bn (+17% qoq and +18.7% yoy) Energy margins expanded to 9.7% vs 4.8% in Q3FY16, 386bps higher than estimate, resulting to estimate beat. Consolidated total tower base stood at 88,808 tower (+0.9% qoq and +3.4%yoy). Tower addition stood at 753 tower (-13.6% qoq and -9.1% yoy) Net tenancy addition on consolidated basis stood at 3114 (-5% qoq and -12% yoy), impacted by one-off tenancy exits (>500). Total tenancy stood at 195035 (+1.6% qoq and 7.0% yoy). Tenancy factor was at 2.19x (+0.8% qoq and 3.7% yoy) We have lowered tenancy growth by 2% each for FY17&18E, due to delayed launch of R-Jio, while incumbents would continue to drive strong tenancies. We remain positive on the medium to long term prospects of tower infrastructure space, given the elevated capex spends by telecom service providers to expand data network. Maintain BUY with revised DCF based PT of Rs470. Estimate Revenue/EBITDA/PAT CAGR of 8%/11%/13% over FY16-18E. We have lowered our service revenues estimate by 1.5%/2%% for FY17/FY18E, resulting to EBITDA cut of 3%/2.4% for the same period. Nevertheless, continued data demand and expansion of data services in non-urban towns would increase demand of telecom towers, going forward. Further, incremental tenancies from R-Jio would reflect in tenancy uptick in FY18E. Risks to our thesis: Downward pressure on rental, further delay in R-Jio’s launch, stringent regulatory norms on BTS radiations and large scale consolidation in telecom industry. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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