Sell Bharti Infratel; target of Rs 165: Emkay Global Financial

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Emkay Global Financial's report on Bharti Infratel

BHIN reported a stable quarter, with a 3% sequential rise in EBITDA. Net tenancy additions jumped meaningfully to 2,116 after underperforming for the last few quarters, while energy margins continued the volatile trend and contracted 132bps qoq to stand at -3.3%. The improvement in net tenancy additions in the quarter indicates significant moderation in exits from VIL. Sharing factor, on a standalone basis, continued its negative trend for the tenth consecutive quarter. Management has now guided for energy margins toward the lower end of 0-3% range. Given the weak delivery in H1 we have cut FY21 energy margin estimates by 192bps. We have raised tower additions over FY21-23 on better than estimated additions in H1FY21.

Outlook

Though healthy tenancy additions in Q2 provide some positivity, consistency in this aspect is key for re-rating as VIL’s future still seems ambiguous. We maintain Sell rating with a revised TP of Rs165 (4x Sep’22E EBITDA).

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