Hold Bharti Infratel; target of Rs 400: Edelweiss

Edelweiss's research report on Bharti InfratelBharti Infratel (Infratel) is estimated to report steady 7.2% revenue CAGR over FY16-18 as significant portion of 3G/4G data network will be implemented by loading 3G/4G equipment on existing 2G sites. Moreover, operating leverage will drive 9.9% EBITDA CAGR over same period. Anchored by our in-depth analysis of capex cycles (coverage and capacity based) using Bharti Airtel’s (Bharti) network expansion as a benchmark for the industry, we anticipate Infratel’s long-term growth rate to settle at 5% once network expansion enters capacity-led expansion phase from current coverage-led expansion phase. Valuations, at 12.0x FY17E and 10.9x FY18E EV/EBITDA, are rich and factor in 320bps RoE expansion over FY16-18. Initiate coverage with ‘HOLD’ and target price of INR400. The stock is trading at 12.0x FY17E and 10.9x FY18E EV/EBITDA. We initiate coverage on Infratel with ‘HOLD’ and a price target of INR400. We typically do not initiate coverage with HOLD recommendation, but in Infratel's case we do so as we do not envisage high returns unless the company's capital structure improves. 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.

Read More