Buy Bharti Airtel
Bharti Airtel
CMP:Rs 914.60
Target Price: NA
CLSA has initiated coverage on Bharti with a ‘buy’ rating on the back of expectations that the company would do well as India’s mobile subscriber base is set to grow at 33% CAGR to 383 million by FY10, implying a penetration of 31%.
“Bharti’s subscriber growth is on track to meet our forecasts of 108 million by FY10 CL and despite an intensely competitive environment, it has raised market share (up 200 bps y-o-y) as well as expanded margins (368 bps y-o-y to 42.8% in Q208).” The success of Bharti’s growing suite of value-added services will aid in mitigating ARPU decline.
The company’s key strengths are management’s proven execution skills, nationwide GSM network and a strong brand, the report says. “The outcome of key pending regulatory issues remain uncertain with the expected long drawn-out legal battle. However, if Trai recommendations on spectrum are implemented, Bharti’s FY09-10 EPS would be hit by 4.4-5.5%, which will be offset by impending upgrade following the positive surprise in the Q2 EBITDA margins,” the report said.
