Hold Bharti Infratel; target of Rs 400: Edelweiss

Edelweiss' research report on Bharti Infratel
Bharti Infratel (Infratel) reported Q1FY18 revenue of INR35.2bn (up 0.1% QoQ) versus Street’s INR35.6bn estimate as energy revenue fell 5.4% QoQ. However, rental revenue growth was strong at 3.5% QoQ led by Reliance Jio’s (RJIO) network rollout and 3G/4G loading. Tenancy addition remained robust—7,795 versus 5,672 QoQ—but tower addition decelerated further to 191 from 391 QoQ. EBITDA margin remained flat QoQ at 44.7% versus Street’s 43.7% estimate.

Outlook

With consolidation in the telecom space, the company is at risk of losing revenue as operators extract synergies from network consolidation. The stock is trading at 11.2x and 10.4x FY18E and FY19E EV/EBITDA, respectively. We maintain ‘HOLD/SP’ with DCF‐based target price of INR400.

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