bharti airtel - edelweiss - may 2011
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Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL , Thomson First Call, Reuters and Factset. Edelweiss Securities Limited
Bharti Airtels (Bharti) Q4FY11 numbers were disappointing. We note that consensus
has revised down EBIT estimates 4.4% and 4.7% for FY12E and FY13E, respectively,
since the announcement of the result. The markets business bottoming out theory
was shaken with Q4FY11 results (voice RPMs declined 3.8% and mobile business
margin dipped 160bps Q-o-Q). However, the Street is optimistic on the stock due to
its relatively attractive valuations and expected strong free cash flow. In this note,
we highlight that the company will have to invest ~USD 4-7 bn in its business,
excluding routine capex of USD 2.5-3 bn p.a., in the next 2 years. This could hit the
estimated FY12-13 free cash flow or force the company to resort to debt, which could
inflate its enterprise value. Ergo, valuations could cease to be attractive.
USD 700 mn payment to Zain coming up in June 2011
Bharti completed the Zain acquisition in June 2010 for USD 10.7 bn, which
included a deferred payment of USD 700 mn to be made a year later. Since
Bharti marked down the subscriber base and margins post-acquisition we believe
it could also adjust the payment of USD 700mn down accordingly.
Likely investment of USD4-7bn to acquire spectrum in FY12-13E
Media reports indicate that Bharti is in talks with Qualcomm to acquire its BWA
licence at a total enterprise value of USD 1.2 bn. It has BWA spectrum in four
circles and if it buys Qualcomms licence, it will bag four more circles including
Mumbai and Delhi. Bharti has 10 MHz of 2G spectrum in most key circles. It has
3G spectrum in 13 circles and BWA spectrum in 4 circles. Thus, we assume that
it will acquire more spectrum over the next two years. Our analysis indicates
that it would require to spend USD4-7bn to become a pan-India 3G and BWA
player in addition to the routine capex of about USD5bn over the next two years.
Outlook and valuations: Still in investment mode; maintain HOLD
We believe competitive intensity continues to remain high. While RCOM and Tata
Docomo were tariff spoilers earlier, we notice that Vodafone is offering
aggressive schemes due to MNP. It is also offering combo plans (cross
subsidizing voice and data) as part of its 3G offering. The street is optimistic on
Bhartis ability to sustain competition due to its strong free cash flows. But our
analysis indicates pressure on cash flows as well. Thus, at 7.7x FY12E
EV/EBITDA, we remain cautious and maintain H OLD / Sec to r ou tpe r fo r m er .
India Equity Research | Telecom Company Update
BHARTI AIRTEL
Inv estments to dent free cash flowMay 12 , 2011
Reuters: BRTI. BO Bloomberg: BHARTI IN
EDELWEISS 4D RATINGS
Absolute Rating HOLD
Rating Relative to Sector O utpe r fo rme r
Risk Rating Relative to Sector Lo w
Sector Relative to Market Unde rwe igh t
Note:Please refer last page of the report for rating explanation
MARKET DATACMP : INR 366
52-week range (INR) : 400 / 254Share in issue (mn) : 3,797.5
M cap (INR bn/USD mn) : 1,319 /31,103
Avg. Daily Vol. BSE/NSE (000) : 6,160.4
SHARE HOLDING PATTERN (%)
Promoters* : 68.3
MFs, FIs & Banks : 8.7
FIIs : 17.2
Others : 5.8
* Promoters pledged shares
(% of share in issue): NI L
PRICE PERFORMANCE (%)
St ock Ni f ty EW T elecom m
I n d e x
1 month 0.9 (5.0) (2.2
3 months 9.9 5.7 6.8
12 months 27.4 10.6 10.6
Ganesh Duvvur
+91 22 4040 7586
Devyani Javer
+91 22 6623 3360
Financ ia ls
Year to March FY10 FY11 FY12E FY13E
Revenue (INR mn) 418,472 594,672 733,548 837,385
Rev. growth (% ) 13.2 42.1 23.4 14.2
EBITDA (INR mn) 167,633 199,662 255,465 308,755
Net profit (INR mn) 89,768 60,467 87,464 104,488
Shares outstanding (mn) 3,798 3,798 3,798 3,798
Diluted EPS (INR) 23.6 15.9 23.0 27.5
EPS growth (% ) 6.0 (32.6) 44.6 19.5
Diluted P/E (x) 15.5 23.0 15.9 13.3
EV/ EBITDA (x) 8.6 10.1 7.8 6.1
ROAE (%) 24.7 13.3 16.7 17.2
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Telecom Need for USD 4-7 bn of investment
Bharti has 10 MHz of 2G spectrum in most of the key circles. With the TRAI set-up
committee recommending pricing at a premium to both 3G and BWA spectrum, we
believe, Bharti would rather prefer to bid (since all future spectrum allotment would
likely be through auctions) for 3G and BWA spectrum. We discuss the following three
scenarios, which, we believe, Bharti will end up with in terms of investment
requirements, apart from the routine capex of USD 2.0-2.5 bn p.a. assumed by the
Street. Key assumptions in all the scenarios is that Bharti will acquire Qualcomms BWA
license for USD 1.2 bn (as reported by media) and intend to be a pan-India player for 3G
and BWA. We also assume spectrum prices for 2G at a 30% discount to the 3G spectrum
price and the last auction prices for 3G and BWA spectrum.
Scenar io 1 : We are assuming that Bharti will focus on more efficient networks i.e. 3G
and BWA. It would use its existing 2G spectrum for voice traffic, 3G spectrum for
carrying the voice traffic of its premium customers and BWA for data of its premium
customers. Under this scenario, its cash outflow over the next two years will be USD 3.9
bn with which it will become a pan-India 3G and BWA operator and continue to hold 2G
spectrum. With routine capex of USD 5 bn cumulative over the next two years, under
this scenario, its cash profits of USD 9.7 bn will be consumed almost entirely. Thus, inFY13, it would end up generating free cash flow of USD 800 mn, assuming it doesnt
acquire any more 2G spectrum. The Street is currently forecasting cumulative free cash
flow of ~USD 4-5bn over the next two years.
Tab le 1 : Scenar io 1
Source: Edelweiss research, Bloomberg, TRAI, DOT
Scenar io 2 : In this scenario, we assume that Bharti will acquire spectrum in 3G for not
only rest of the circles where it currently lacks presence, but also will also acquire
additional 3G spectrum in metros and category A circles. It would also acquire BWA
spectrum to become a pan-India player after acquiring Qualcomms BWA license. While
Qualcomms license and BWA spectrum will require investment of USD 2.2 bn, 3G
spectrum in rest of the circles and additional spectrum in key circles, at the earlier
auction price, will require investment of USD 3 bn. Thus, under this scenario, itsinvestment requirements over the next two years will exceed its cash profits.
USD mn Comments
Payment to Zain 700
Acquisition of Qualcomm's BWA company 1,200 As per media reports
Acquisition of 2G spectrum 0 Bharti would rather acquire 3G spectrum
Acquisition of 5 MHz 3G spectrum in rest of the circles 990To complete pan-India 3G presence at prices
'discovered' in the last auctionAcquisition of 20 MHz BWA spectrum in rest of the
circles1,027
To complete pan-India BWA presence at prices
'discovered' in the last auction
To t al cash ou t f low 3 ,9 17
Routine capex in FY12 and FY13 5,000 Including Africa and tower capex
To t al i n v est men t r equ i r ed in FY12 an d FY13 8 ,9 1 7
To t al cash p r o f i t s in FY1 2 an d FY1 3 9 ,7 13 As per Bloomberg consensus
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Edelweiss Securities Limited 3
Bharti Airtel
Tab le 2 : Scenar io 2
Source: Edelweiss research, Bloomberg, TRAI, DOT
Scenar io 3 : Under this scenario, we assume that due to policy flip-flop, Bharti would
participate in all auctions and acquire spectrum across the board to avoid uncertainty in
future. Thus, Bharti will acquire 5 Mhz of 2G spectrum in metros and Category A circles,
3G spectrum in rest of the circles, additional 3G spectrum in metros and Category A
circles, and BWA spectrum in rest of the circles after acquiring Qualcomms license. This,
we believe, from a cash-flow standpoint, is the worst case as it could entail investments
of USD 12.7 bn over the next two years. Thus, cash profits of USD 9.7 bn, as projected
by the Street, would be inadequate to fund these investments.
Tab le 3 : Scenar io 3
Source: Edelweiss research, Bloomberg, TRAI, DOT
We believe, Scenario 1 is the base case, which will enable Bharti to become a pan-India
3G and BWA player. We have used the spectrum price, discovered through the earlier
auction for 3G and BWA, in our calculations. Even if we assume that 2G, 3G and BWA
spectrum prices would halve in the next round of auctions, the investment required
USD mn Comments
Payment to Zain in June 2011 700
Acquisition of Qualcomm's BWA company 1,200 As per media reports
Acquisition of 2G spectrum 0
We assume that Bharti will acquire either additional
2G or 3G spectrum to meet capacity requirements in
Metro & Category A; we assume Bharti will choose to
acquire 3G spectrum
Acquisition of 5 MHz 3G spectrum in rest of the circles 990To complete pan-India 3G presence at prices
'discovered' in the last auction
Acquisition of 5MHz 3G spectrum in Metros and Category
A2,959
We assume that Bharti will acquire additional 3G
spectrum to meet its capacity requirements in high
usage circles.
Acquisition of 20Mhz BWA spectrum in rest of the circles 1,027To complete pan-India BWA presence at prices
'discovered' in the last auction
To t al cash ou t f low 6 ,8 76
Routine capex in FY12 and FY13 5,000 Including Africa and tower capex
To t al in v est men t requ i r ed in FY12 an d FY13 1 1 ,8 76
To t al cash p r o f i t s in FY1 2 an d FY1 3 9 ,7 13 As per Bloomberg consensus
USD mn CommentsPayment to Zain in June 2011 700
Acquisition of Qualcomm's BWA company 1,200 As per media reports
Acquisition of 20 Mhz BWA spectrum in rest of the circles 1,027To complete pan-India BWA presence at prices
'discovered' in the last auction
Acquisition of 2MHz of 2G spectrum in Metros and A
category circles862
We assume that Bharti will acquire 2G & 3G spectrum
to meet its capacity requirements in high usage
circles
Acquisition of 5 MHz 3G spectrum in rest of the circles 990To complete pan-India 3G presence at prices
'discovered' in the last auction
Acquisition of 5MHz 3G spectrum in Metros and Category
A2,959
We assume that Bharti will acquire 2G & 3G spectrum
to meet its capacity requirements in high usage
circles
To t al cash ou t f low 7 ,7 38
Routine capex for 2 years 5,000 Including Africa and tower capex
To t al in v est men t requ i r ed in FY12 an d FY13 1 2 ,7 38
To t al cash p r o f i t s in FY1 2 an d FY1 3 9 ,7 13 As per Bloomberg consensus
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Telecomwould be USD 8 bn, USD 9.4 bn and USD 10 bn under the three scenarios, respectively,
compared with cash profits of USD 9.7 bn cumulative over the next two years.
Outlook and valuations: Investment requirements exceed cash flows; maintain
HOLD
The Street has believed that since headline tariffs have remained stable for some time,
competitive intensity has reduced. Also, threat of cancellation of licenses of new entrants
and difficulty to fund further investments for smaller operators would bring back pricing
power to operators like Bharti and Vodafone. Thus, the Street believed that RPMs and
margins had bottomed out and would start improving. However, Bhartis Q4FY11
performance has raised doubts in the minds of investors, in our view.
But the Streets continued optimism on Bharti hinges on the forecasted strong free cash
flows from FY12 and cheaper valuations relative to the broad market. We believe, the
Street is only factoring in routine capex of USD 2.5-3.0 bn p.a. for FY12 and FY13 and
ignoring the investment Bharti may have to make to acquire 3G and BWA spectrum for
future growth. We agree that these investments are for the long term and should not be
adjusted against FY12 and FY13 cash flows. We, however, believe that investors must be
aware of these likely cash outflows. We expect Bharti to monetize its tower assets and
generate some cash flow. It must be noted that we are not assuming any cash outflow
that may occur on account of the one-time excess spectrum charge as recommended by
TRAI in our calculations.
In our view, competitive intensity continues to remain high. While the Street believes
consolidation is imminent, we believe, until 2010, RCOM and Tata Docomo were tariff
spoilers. However, with MNP implementation and launch of 3G services, we see
Vodafone offering attractive schemes to its existing high-end customers, which is forcing
Bharti to respond and, hence, the impact on RPMs and margins as seen in the Q4FY11
results. Thus, we continue to remain cautious and urge investors to focus on the likely
cash outflows that Bharti will witness. We maintain H OLD/ Sec to r Ou tpe r fo r m er
recommendation/rating on Bharti.
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Edelweiss Securities Limited 5
Bharti Airtel
An n e xu re
Tab le 1 : Pr i ce o f spect r um ( I NR m n)
Source: TRAI
3G (5 MHz) BWA (20 MHz)
Committee recommended price of
incremental spectrum 1800 MHz
(>6.2 MHz) per MHz
Met r o 7 1 ,0 8 3 5 0 ,5 7 2 4 ,547
Delhi 33,169 22,410 2,497
Mumbai 32,471 22,930 1,573
Kolkata 5,443 5,232 476
Cat eg or y A 6 7 ,5 1 9 6 2 ,0 1 3 19 ,338
Maharashtra 12,578 9,156 3,745
Gujarat 10,761 6,139 3,554
Andhra Pradesh 13,731 10,591 4,320
Karnataka 15,799 15,433 3,459
Tamil Nadu 14,649 20,695 4,261
Cat eg or y B 2 4 ,3 8 7 1 3 ,3 0 2 18 ,422
Kerala 3,125 2,587 2,322
Punjab 3,220 3,323 1,806
Haryana 2,226 1,199 1,079
UP (E) 3,646 1,425 2,526
UP (W) 5,140 1,839 3,188
Rajasthan 3,210 973 2,788
MP 2,584 1,247 2,545
WB 1,236 710 2,170
Cat eg or y C 4 ,5 1 8 2 ,5 9 1 3 ,412
HP 372 207 281
Bihar 2,035 993 1,537
Orissa 970 636 733
Assam 415 330 313
North East 423 213 320
J&K 303 213 229
Pan - I n d ia 1 6 7 , 5 0 6 1 2 8 , 4 7 8 4 5 , 7 1 9
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TelecomTab le 2 : Bhar t i s spect r um p ro f i l e ( MHz)
Source: TRAI
2G 3G BWA Total (2G + 3G)
Met r o 2 7 .2 1 0 2 0 3 7 .2
Delhi 10.0 5 15.0
Mumbai 9.2 5 14.2
Kolkata 8.0 20 8.0
Cat eg or y A 4 3 .6 1 5 4 0 5 8 .6
Maharashtra 8.2 20 8.2
Gujarat 6.2 6.2
Andhra Pradesh 10.0 5 15.0
Karnataka 10.0 5 20 15.0
Tamil Nadu 9.2 5 14.2
Cat eg or y B 5 6 .0 1 5 2 0 7 1 .0
Kerala 6.2 6.2
Punjab 7.8 20 7.8
Haryana 6.2 6.2
UP (E) 7.2 7.2
UP (W) 6.2 5 11.2
Rajasthan 8.2 5 13.2
MP 8.0 8.0
WB 6.2 5 11.2
Cat eg or y C 4 2 .0 2 5 0 6 7 .0
HP 6.2 5 11.2
Bihar 9.2 5 14.2
Orissa 8.0 8.0
Assam 6.2 5 11.2
North East 6.2 5 11.2
J&K 6.2 5 11.2
Pan - I n d ia 1 6 8 .8 6 5 8 0 2 3 3 .8
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Edelweiss Securities Limited 7
Bharti Airtel
Company Description
Bharti is Indias largest integrated telecom operator providing mobile, broadband &
telephone (B&T) and enterprise services. It is Indias largest wireless operator with a
pan-India mobility network spanning all 22 telecom circles; its B&T services are currently
available in 95 cities. Bharti had a wireless subscriber base of ~162 mn in FY11, implying
wireless subscriber market share of ~20%. The enterprise services division provides
carrier (long distance services) and other services to corporates. Bharti has recently
launched 2G and 3G services as the fifth mobile operator in Sri Lanka. It has also
acquired 70% stake in Warid Telecom, Bangladeshs fourth largest telecom operator for
USD 300 mn in January 2010. Also, it acquired Zain to operate in the Africa market.
Investment Theme
We expect competitive intensity to increase, following the implementation of MNP and
launch of 3G services. We believe Bharti is relatively well placed among Indian telecos,
given its scale of operations, strong execution capabilities and robust balance sheet. We
expect the tough industry scenario to dampen Bhartis growth metrics in the near term.
The stock has outperformed the broad indices over the past three months as the Street
has turned optimistic. We remain cautious on the stock.
Key Risks
If operators maintain price discipline, then Bharti will not only retain market share but
will also be able to defend margins. Under-ownership of the stock could also lead to
continued stock outperformance.
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TelecomFinancial Statements
I n com e st a t em en t ( I NR m n )
Year to March FY09 FY10 FY11 FY12E FY13E
Gross revenues 468,100 486,904 667,013 809,936 930,428Inter segment 98,485 68,432 72,341 76,388 93,043
Net revenues 369,615 418,472 594,672 733,548 837,385
Direct costs 151,997 175,712 254,421 314,116 361,153
Employee costs 16,992 19,028 32,784 40,251 41,869
Other expenses 48,949 56,099 107,805 123,716 125,608
Total operating expenses 217,938 250,839 395,010 478,083 528,630
EBITDA 151,677 167,633 199,662 255,465 308,755
Depreciation and amortisation 47,581 62,832 102,066 126,316 142,319
EBIT 104,096 104,801 97,596 129,149 166,436
Interest expenses 16,343 4,208 24,162 22,824 24,762
Other income 5,319 4,498 3,348 4,002 1,971
Profit before tax 93,072 105,091 76,782 110,327 143,645
Provision for tax 6,615 13,453 17,790 26,478 41,657
Core profit 86,457 91,638 58,992 83,848 101,988
Profit after tax 86,457 91,638 58,992 83,848 101,988
Minority interest 1,759 1,870 (1,475) (3,616) (2,500)
Profit after minority interest 84,698 89,768 60,467 87,464 104,488
Equity shares outstanding (mn) 3,796 3,798 3,798 3,798 3,798
EPS (INR) basic 22.3 23.6 15.9 23.0 27.5
Diluted shares (mn) 3,796 3,798 3,798 3,798 3,798
EPS (INR) fully diluted 22.3 23.6 15.9 23.0 27.5
CEPS (INR) 34.8 40.2 42.8 56.3 65.0
Dividend per share 1.0 1.0 1.0 1.2 1.2
Dividend payout % 5.1 4.8 7.5 6.2 5.1
Comm on s i ze me t r i c s - as % o f ne t r ev enues
Year to March FY09 FY10 FY11 FY12E FY13E
Operating expenses 59.0 59.9 66.4 65.2 63.1
Depreciation 12.9 15.0 17.2 17.2 17.0
Interest expenditure 4.4 1.0 4.1 3.1 3.0
EBITDA margins 41.0 40.1 33.6 34.8 36.9
Net profit margins 23.4 21.9 9.9 11.4 12.2
Gr o w t h m e t r ics ( % )Year to March FY09 FY10 FY11 FY12E FY13E
Revenues 36.8 13.2 42.1 23.4 14.2
EBITDA 33.4 10.5 19.1 27.9 20.9
PBT 21.6 12.9 (26.9) 43.7 30.2
Net profit 26.4 6.0 (32.6) 44.6 19.5
EPS 26.4 6.0 (32.6) 44.6 19.5
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Bharti Airtel
Balan ce sh eet ( I NR m n )
As on 31st March FY09 FY10 FY11E FY12E FY13E
Equity capital 18,982 18,988 18,988 18,988 18,988
Reserves & surplus 284,963 402,952 468,680 537,951 637,214
Shareholders funds 303,945 421,940 487,668 556,939 656,202
Minority Interest 10,704 25,285 28,563 24,947 22,447Secured loans 53,993 81,474 532,338 521,691 427,787
Unsecured loans 64,808 20,424 84,370 84,000 84,000
Borrowings 118,801 101,898 616,708 605,691 511,787
Sou r ces o f f u n ds 4 3 3 ,4 5 0 5 4 9 ,1 2 3 1 ,1 3 2 ,9 3 8 1 ,1 8 7 ,5 7 7 1 ,1 9 0 ,4 3 5
Gross block 549,810 678,122 931,873 1,071,373 1,210,873
Accumulated depreciation 140,675 195,493 280,447 383,452 500,803
Net block 409,136 482,629 651,426 687,921 710,070
Total fixed assets 409,136 482,629 651,426 687,921 710,070
Goodwill & Intangibles 40,364 59,890 637,317 614,006 589,037
Investments 38,053 52,419 6,224 6,224 6,224
Inventories 963 484 2,138 2,639 3,001
Sundry debtors 18,262 35,711 54,929 67,757 77,348
Cash and equivalents 11,145 25,323 9,575 19,294 24,083
Other current assets 77,216 41,995 58,393 73,355 83,739
Total current assets 107,585 103,513 125,035 163,045 188,170
Sundry creditors and others 162,942 153,427 312,373 284,096 287,580
Provisions 0 4,243 6,085 30,917 46,881
Total CL & provisions 162,942 157,670 318,458 315,012 334,461
Net current assets (55,357) (54,157) (193,423) (151,968) (146,291)
Net Deferred tax 1,254 8,342 31,394 31,394 31,394
Uses o f f u n d s 4 3 3 ,4 5 0 5 4 9 ,1 2 3 1 ,1 3 2 ,9 3 8 1 ,1 8 7 ,5 7 7 1 ,1 9 0 ,4 3 5
Book value per share (BV) (INR) 80 111 128 147 173
Free cash f low
Year to March FY09 FY10 FY11E FY12E FY13E
Net profit 86,457 91,638 58,992 83,848 101,988
Depreciation 47,581 62,832 102,066 126,316 142,319
Others 3,393 (31,098) (1) (13,749) (1)
Gross cash flow 137,430 123,372 161,057 196,415 244,306
Less: Changes in W. C. 16,931 (12,978) (123,518) 31,736 888
Operating cash flow 120,499 136,350 284,575 164,679 243,418
Less: Capex 136,304 128,312 831,178 139,500 139,500
Fr ee cash f low ( 1 5 ,8 0 5 ) 8 ,0 3 8 ( 5 4 6 ,6 0 3 ) 2 5 ,1 7 9 1 0 3 ,9 1 8
Cas h f l ow m e t r i c es
Year to March FY09 FY10 FY11E FY12E FY13E
Operating cash flow 120,499 136,350 284,575 164,679 243,418
Financing cash flow 13,852 (26,217) 510,367 (15,460) (99,129)
Investing cash flow (140,191) (81,875) (846,347) (139,500) (139,500)
Net cash flow (5,840) 28,258 (51,405) 9,719 4,789
Capex (140,171) (81,831) (846,347) (139,500) (139,500)
Dividends paid - - (4,443) (4,443) (5,224)
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TelecomP r o f i tab i l i t y & l i qu id i t y r a t i os
Year to March FY09 FY10 FY11 FY12E FY13E
ROAE (%) 32.5 24.7 13.3 16.7 17.2
ROACE (%) 31.1 23.5 12.0 11.2 14.1
Current ratio 0.7 0.7 0.4 0.5 0.6
Debtors (days) 17 24 28 31 32Fixed assets t/o (x) 1.0 0.9 1.0 1.1 1.2
Average working capital t/o (x) (5.6) (7.6) (4.8) (4.2) (5.6)
Debt/Equity 0.4 0.2 1.3 1.1 0.8
Debt/EBITDA 0.8 0.6 3.1 2.4 1.7
Adjusted debt/Equity 0.4 0.2 1.3 1.1 0.8
Oper a t i ng r a t i os
Year to March FY09 FY10 FY11 FY12E FY13E
Total asset turnover 1.0 0.9 0.7 0.6 0.7
Fixed asset turnover 1.0 0.9 1.0 1.1 1.2
Equity turnover 1.4 1.2 1.3 1.4 1.4
D u pon t ana l y s i s
Year to March FY09 FY10 FY11 FY12E FY13E
NP margin (%) 22.9 21.5 10.2 11.9 12.5
Total assets turnover 1.0 0.9 0.7 0.6 0.7
Leverage multiplier 1.5 1.4 1.8 2.2 2.0
ROE (%) 32.5 24.7 13.3 16.7 17.2
V a lua t i on pa r am e te r s
Year to March FY09 FY10 FY11 FY12E FY13E
Diluted EPS (INR) 22.3 23.6 15.9 23.0 27.5
Y-o-Y growth 26.4 6.0 (32.6) 44.6 19.5
CEPS (INR) 34.8 40.2 42.8 56.3 65.0
Diluted P/E (x) 16.4 15.5 23.0 15.9 13.3
Price/BV(x) 4.6 3.3 2.9 2.5 2.1
EV/Sales (x) 4.0 3.4 3.4 2.7 2.3
EV/EBITDA (x) 9.7 8.6 10.1 7.8 6.1
Dividend yield (%) 0.3 0.3 0.3 0.3 0.3
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Bharti Airtel
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Bharti Airtel HOLD SO L Idea Cellular HOLD SP M
Mahanagar Telephone Nigam Ltd HOLD SU M Reliance Communication REDUCE SU H
Tulip Telecom BUY SO H
RATING & INTERPRETATION
ABSOLUTE RATING
Rat ing s Ex p ect ed abso lu t e r et u r ns ov er 12 m on t hs
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Rat ing s Cr i t er iaSector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Rat ing s Cr i t er ia
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Rat ing s Cr i t er ia
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
-
8/2/2019 Bharti Airtel - Edelweiss - May 2011
12/12
12 Edelweiss Securities Limited
Telecom
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Co ve ra g e g ro u p (s ) o f s t o cks b y p r ima ry a n a lys t ( s ) : Telecom
Bharti Airtel, Idea Cellular, Mahanagar Telephone Nigam Ltd , Reliance Communication, Tulip Telecom
Dis t r ibu t ion o f Ra t ings / Ma rke t Cap
Edelw e iss Research Coverage Un iver se
Rating Distribution* 118 51 17 189* 3 stocks under review
Market Cap (INR) 111 61 17
> 5 0 bn B et w e en 1 0 b n a n d 5 0 b n < 1 0 bn
Dat e Com pany Ti t l e Pr i ce ( I NR) Recos
Bu y Ho ld Redu ce To t al
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