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MOSL: BHARTI AIRTEL (Buy) - Above estimates led by continued strong performance in India Mobile




Motilal Oswal Securities Ltd.


30 Jul 2014





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BHARTI AIRTEL 1QFY15: Above estimates led by continued strong performance in India Mobile; upgrading EBITDA 4% and TP 14%; Buy (BHARTI IN, Mkt. Cap USD23.6b, CMP INR354, TP INR465, 31% Upside, Buy) 1QFY15 revenue/EBITDA above estimates; continued strong growth in PAT: BHARTI’s 1QFY15 EBITDA grew 18% YoY and 5.7% QoQ to INR 77.2b (est INR74.6b) driven by strong performance in India mobile business. Consolidated revenue grew 13.3% YoY and 3.3% QoQ to INR 229.6b (vs est INR224.9b), boosted by India mobile, Telemedia and DTH segments but dragged down by Africa business. Proforma PAT increased 97% YoY and 13.8% QoQ to INR13.6b. Reported PAT of INR11.1b included INR2.5b exceptional loss due to various disputes. PAT performance was strong despite INR3b forex loss. Continued robust recovery in India mobile: India mobile revenue grew 9.9% YoY and 5.5% QoQ to INR127.5b. EBITDA grew 25% YoY and 11.7% QoQ to INR47.1b (vs est of INR44b). Mobile traffic grew 2.3% QoQ (vs est of 1.5%); mobile RPM increased 3.5% QoQ to 46.5p (vs est of 45.6p). Data revenue contribution increased to 12.4% (up 90bp QoQ) on 17% QoQ traffic growth. Africa performance remains muted: Africa EBIDTA declined 2.3% QoQ to USD283m (vs est USD286m). Revenue grew 1.6% QoQ (primarily RPM led), impacted by 1.4% revenue-weighted currency depreciation. Subscriber base declined QoQ due to promotional bans in Nigeria and KYC changes in Uganda. Net debt down INR28b QoQ to INR577b: Net debt declined 4.6% QoQ to INR577b on strong free cash generation. 1QFY15 capex stood at INR39.9b. Change in segment reporting: BHARTI has made changes to the segment reporting structure. India & South Asia will include 1) Bangladesh and Srilanka operations and 2) Acquisition debt/associated finance cost of Africa business. Upgrading EBITDA by 4%; TP by 14%; maintain Buy: We are upgrading our EBITDA estimates by ~4%. We expect 14% consolidated EBITDA CAGR over FY14-16E. The stock trades at proportionate EV/EBITDA of 6.5x FY15E and 5.6x FY16E. Maintain Buy with a revised target price of INR465 (INR410 earlier) based on 6.5x FY14 EV/EBITDA for India business (ex towers), 5x EV/EBITDA for Africa, and 15% discount vs fair value for Bharti Infratel (recently upgraded).

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