ICICI Direct recommended hold rating on Bharti Infratel with a target price of Rs 285 in its research report dated January 09, 2019.
ICICI Direct's research report on Bharti Infratel
We attended the “Analyst Day” of Bharti Infratel wherein the management apprised on the Indus merger update and its “aspirational” growth path ahead. They maintained that merger with Indus is on track (currently awaiting NCLT approvals) and is expected to be complete by June, 2019. As a targeted area for future growth, the company has identified small cells, in-building solutions, fibre sharing, Wi-Fi, smart cities and managed services. Management also envisages these new services contributing at least a third of overall revenues, in the next five years. We note that amid this long term chartered growth plan, the major risk is in the current business growth visibility where continued pressure on incumbents, especially Vodafone-Idea and its preference to rationalise networks over expansion could hinder growth in the near and medium term.
Moreover, near term growth challenges remain amid incumbents’ stressed financials and balance sheet. Therefore, we maintain our HOLD recommendation with a DCF-based target price of Rs 285/share. Our target price implies 8.5x FY20E EV/EBITDA on the merged entity Proforma financials.
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