Bharti Airtel

Buy Bharti Airtel for target Rs 1,150: Religare
29 Jul, 2008

MUMBAI: Religare Research has maintained ‘buy’ on Bharti Airtel for a target price of Rs 1,150. The company has released a good set of numbers in April-June 2008-09, ahead of the brokerage estimates. Strong subscriber additions in conjunction with higher mobile traffic from existing and new clients supported a revenue growth of 8.5 per cent quarter on quarter.

A decrease in STD rates and roaming charges boosted mobile traffic volumes but caused margins in the segment to decline. In a further dampener to mobile margins, the licence fee concession period in six circles expired during the quarter, elevating licence costs. However, average revenue per user in the mobile segment bettered Religare’s estimate of Rs 350, a marginal decline of 2 per cent quarter on quarter against their expectation of a 5.2 per cent decline.

Religare has revised their ARPU assumption since the gestation period for rural customers is proving to be lower than anticipated, with traffic picking up at a rapid pace. The brokerage has increased their revenue and earnings estimates for 2008-09 and 2009-10 based on strong subscriber additions and their revised ARPU assumptions.

The stock is trading at 16.8x and 13.8x expected FY09 and FY10 earnings of Rs 47.4 and Rs 57.7 respectively.