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Last Updated : Oct 23, 2019 02:57 PM IST | Source:

Hold Bharti Infratel; target of Rs 270: ICICI Direct

ICICI Direct recommended Hold rating on Bharti Infratel with a target price of Rs 270 in its research report dated October 23, 2019.

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ICICI Direct's research report on Bharti Infratel

Bharti Infratel continued to report a muted performance on the topline front given the weak gross tenancy addition. Revenues (on a proportionate consolidation basis) came in at Rs 3637.6 crore, down 2% QoQ with core rental revenues of Rs 2328.5 crore, down 1% QoQ. It should be noted that underlying Q2FY20 revenue growth was weak, albeit exit penalty (Rs 101 crore), Ind-AS 116 adoption (rent equalisation of Rs 76.7 crore) and extended occupation of exiting tenants (~3750 collocations where actual exits are yet to happen despite exit notice) led to a better-than-expected show on a reported basis. The company reported a net increase of 159 co-locations on consolidated basis vs. our expectation of a net loss of ~700 tenancies. Reported EBITDA at Rs 1878.3 crore was better on account of lower other expenses (bad debt recoveries). Reported EBITDA margins, consequently, at 51.6% (up 50 bps QoQ) were higher than expected. Valuation & Outlook We note the key risk for Infratel is on tenancy growth concerns, pricing and terms of payments (as telcos continue to struggle at operating levels) and possibly in worst case, Vodafone Idea’s survival (it is an anchor tenant). Notwithstanding, the company’s belief on capitalising on large opportunities in adjacent areas, near/medium term challenges cannot be ruled out.


Therefore, we maintain our HOLD recommendation with a DCF based target price of Rs 270/share. Our target price implies 6.5x FY21E EV/EBITDA on the merged entity proforma financials.

For all recommendations report, click here

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First Published on Oct 23, 2019 02:57 pm
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