INSUBCONTINENT EXCLUSIVE:
Motilal Oswal Securities has a neutral call on Bharti Infratel Ltd
with a target price of Rs 346.
The current market price of Bharti Infratel Ltd
is Rs 319.8 Time period given by the analyst is a year when Bharti Infratel Ltd
price can reach defined target
Bharti Infratel Ltd., incorporated in the year 2006, is a large-cap company with a market cap of Rs 59529.64 crore operating in
Investment rationale by Motilal Oswal: We have built in zero tenancy growth in FY19 considering the downward pressure that could come from
tenancy exits by Vodafone-Idea and smaller players
We maintain our DCF-based target price to Rs 346, implying EV/tenancy of Rs 2.7 m and EV/tower of Rs 6.1 m on FY20E
In our view, Indus Towers' acquisition could prove beneficial due to (a) lower valuation (a 14% discount to Bharti Infratel) and (b)
improvement in capital structure and RoCE due to utilisation of surplus cash for Idea and Providence stake purchase
However, given the rich valuation of 9.4x EV/EBITDA, which builds in 7% EBITDA cut in FY19 (with downward bias), and growth headwinds for
the next 4-6 quarters, we remain cautious
