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Motilal Oswal
Bharti Airtel (Buy)
CMP: ₹440.6
Target: ₹620
Bharti Airtel is a global telecommunications company with operations in 17 countries across Asia and Africa. In India, the company’s product offerings include 2G, 3G and 4G wireless services, mobile commerce, fixed line services, high-speed home broadband, DTH and enterprise services, including national and international long-distance services to carriers.
Our estimates do not capture the potential upside for Bharti Airtel from incremental ARPU growth or market share gains, but factor in the AGR liability impact of ₹34,300 crore (according to Bharti Airtel) as against Department of Telecommunications’ (DoT) figure of ₹44,500 crore. In either case, there would be EBITDA growth opportunity.
EBITDA of ₹62,100 crore (based on our ARPU workings) could generate FCF yield (post interest) of 11 per cent. Thus, 10x EV/EBITDA could derive a target price of ₹910 after factoring in the impact of Bharti Infratel. Further, this does not capture the potential deleveraging benefits.
We maintain our ‘Buy’ rating with SOTP-based target price of ₹620, assigning 11x (to capture the incremental earnings upside) on India wireless EBITDA and Africa at 6x.
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