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 Infrastructure sector.
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.
Maintain Neutral.