RESULT REVIEW 3QFY19 25 JAN 2019

Bharti Infratel BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

Risk reward favorable Bharti Infratel’s (BHIN) 3QFY19 results were better than estimates. BHIN rental revenue and EBITDA ex energy was -9.7%/-11.9% YoY. PAT was up 11% YoY owing to higher finance income. 7.3% QoQ improvement in rental/tenant (13% YoY) was a key positive surprise. We believe this is due to the reset of rentals for existing tenants.

BHIN witnessed loss of 39k tenants YoY to 174k or 18.3% decline. Despite high operating leverage of tower business, EBITDA decline has been of a modest 12% YoY; a key positive. This is owing to (a) increase in rental for surviving tenants as weaker players exited (b) high loading of 4G BTS and (c) cost rationalization (opex ex-energy declined by 3.5% YoY).

We remain positive on BHIN with TP of Rs 344 @ 25x Dec-20E EPS (for merged entity). Key reasons are (a) stock has corrected by ~45% from peak (b) on account of savings on DDT (~Rs 5bn) and earnings accretion from Indus acquisition (c) healthy dividend yield of ~6% (d) uncertainty receding from Voda-Idea merger impact (e) growth resumption owing to robust data usage and (f) prognosis for rental renegotiations is weak in near term.

Key highlights 3QFY19 highlights: BHIN is yet to see the impact of

~2,540 tenants churn on financials as it has received termination notices but services continue. Revenue and EBITDA are better to that extent. Gross additions improved QoQ to 2,740 (vs. 2,341 in 1HFY19).

Key con-call highlights: (1) BHIN’s is witnessing increased demand for co-location as well as for new towers, which till now was restricted to loading. This is positive from growth perspective. (2) Jio offering its tower for sharing is a risk. However, BHIN hasn’t witnessed any MSAs signed by Jio. (3) BHIN expects Indus merger to consummate by Jun-19.

Exit penalties settled – marginally positive: BHIN has settled exit penalties for Voda-Idea, Tata etc for Rs 10.7bn for BHIN + 42% of Indus (Rs 18bn for BHIN + 100% of Indus), ~Rs 6/sh. This is against overall liability of Rs 20/37bn for 42/100% of Indus i.e. settlement at ~50%. We had assumed nil receipt from exit penalty. Back of the envelope calculations reveal settlements at ~Rs 175-180k/tenancy lost (equal to six months rental) in trailing 15m since consolidation started taking place. BHIN will receive the settlement amounts in 36 EMIs along with 7% interest.

Consolidated Financial Summary (BHIN + 42% of Indus) (Rs mn) 3QFY19 3QFY18 YoY (%) 2QFY19 QoQ (%) FY17 FY18 FY19E FY20E FY21E

Net Sales 20,409 22,598 (9.7) 21,201 (3.7) 134,236 144,896 145,472 145,849 149,176

EBITDA 2,021 2,266 (10.8) 2,139 (5.5) 58,969 63,801 58,911 56,773 56,682

APAT 6,484 5,854 10.8 5,998 8.1 27,470 25,437 25,437 26,124 25,824

Diluted EPS (Rs) 3.5 3.2 10.8 3.2 8.1 14.9 13.8 13.8 14.1 14.0

P/E (x)

17.8 19.2 19.2 18.7 18.9

EV / EBITDA (x)

7.2 7.0 7.9 8.0 7.8

RoE (%)

16.3 15.7 16.1 17.9 17.5 Source: Company, HDFC sec Inst Research

INDUSTRY TELECOM

CMP (as on 24 Jan 2019) Rs 263

Target Price Rs 344

Nifty 10,850

Sensex 36,195

KEY STOCK DATA

Bloomberg BHIN IN

No. of Shares (mn) 1,850

MCap (Rs bn) / ($ mn) 486/6,829

6m avg traded value (Rs mn) 733

STOCK PERFORMANCE (%)

52 Week high / low Rs 356/242

3M 6M 12M

Absolute (%) (0.1) (8.0) (23.2)

Relative (%) (6.4) (6.3) (23.3)

SHAREHOLDING PATTERN (%)

Promoters 53.5

FIs & Local MFs 3.0

FPIs 42.3

Public & Others 1.2

Source : BSE

Himanshu Shah himanshu.shah@hdfcsec.com +91-22-6171-7315 Mansi Lall mansi.lall@hdfcsec.com +91-22-3021-2070

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Quarterly Financial Snapshot: Consolidated (BHIN + 42% of Indus)(Rs mn) 3QFY18 2QFY19 3QFY19 YoY (%) QoQ (%) 9MFY18 9MFY19 YoY (%)

Rental income 22,598 21,201 20,409 (9.7) (3.7) 67,837 63,599 (6.2)

Energy and other reimbursements 13,955 15,482 15,440 10.6 (0.3) 40,437 45,668 12.9

Net Sales 36,553 36,683 35,849 (1.9) (2.3) 108,274 109,267 0.9

Power and fuel 12,987 14,367 14,184 9.2 (1.3) 37,624 42,755 13.6

Rent 3,172 3,168 3,050 (3.8) (3.7) 9,385 9,424 0.4

Employee benefits expenses 1,254 1,222 1,242 (1.0) 1.6 3,733 3,693 (1.1)

R&M expenses 2,266 2,139 2,021 (10.8) (5.5) 6,859 6,375 (7.1)

Other expenses 892 923 864 (3.1) (6.4) 2,795 2,472 (11.6)

Total Operating Expenses 20,571 21,819 21,361 3.8 (2.1) 60,396 64,719 7.2

EBITDA 15,982 14,864 14,488 (9.3) (2.5) 47,878 44,548 (7.0)

EBITDA ex energy 15,014 13,749 13,232 (11.9) (3.8) 45,065 41,635 (7.6)

Depreciation 5,895 5,625 5,727 (2.8) 1.8 17,741 16,741 (5.6)

EBIT 10,087 9,239 8,761 (13.1) (5.2) 30,137 27,807 (7.7)

Other Income 495 557 460 (7.1) (17.4) 1,370 1,626 18.7

Finance costs/(income) 510 (442) (601) (217.8) 36.0 (226) (1,328) 487.6

PBT 10,072 10,238 9,822 (2.5) (4.1) 31,733 30,761 (3.1)

Tax 4,218 3,883 3,891 (7.8) 0.2 12,856 12,095 (5.9)

Xo - 357 (553)

- (196)

RPAT 5,854 5,998 6,484 10.8 8.1 18,877 18,862 (0.1)

Energy spread 968 1,115 1,256 29.8 12.6 2,813 2,913 3.6

Source: Company, HDFC sec Inst Research

Margin Analysis (%)

As % of Net Sales 3QFY18 2QFY19 3QFY19 YoY (bps) QoQ (bps) 9MFY18 9MFY19 YoY (%)

Power and fuel 34.5 39.2 39.6 505 90 34.7 39.1 438

Rent 8.5 8.6 8.5 1 (22) 8.7 8.6 (4)

Employee benefits expenses 3.5 3.3 3.5 0 12 3.4 3.4 (7)

R&M expenses 6.2 5.8 5.6 (54) (39) 6.3 5.8 (50)

Other expenses 3.1 2.5 2.4 (67) 55 2.6 2.3 (32)

Total Opex 55.7 59.5 59.6 384 95 55.8 59.2 345

EBITDA Margin 44.3 40.5 40.4 (384) (95) 44.2 40.8 (345)

EBITDA Margin ex energy 65.8 64.9 64.8 (97) (181) 66.4 65.5 (97)

EBIT Margin 28.0 25.2 24.4 (353) (226) 27.8 25.4 (239)

RPAT Margin 17.5 16.4 18.1 59 72 17.4 17.3 (17)

Energy Spread* 9.0 7.2 8.1 (86) 446 7.0 6.4 (58)

Tax Rate 40.4 37.9 39.6 (80) (76) 40.5 39.3 (119)

Source: Company, HDFC sec Inst Research *Energy spread = (energy revenue less power & fuel costs)/ energy revenue

Decline in rental revenue and EBITDA is due to 18% decline in tenancies YoY owing to Voda-Idea merger Exceptional item consists of provision made for disputed electricity arrears in 2QFY19 and receipt of exit penalty in 3QFY19

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Operating KPIs

3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 YoY (%) QoQ (%)

No. of towers

Bharti Infratel (consolidated)* 91,007 91,451 91,759 92,123 92,301 1.4 0.2

Bharti Infratel (standalone) 39,363 39,523 39,719 39,946 40,192 2.1 0.6

Indus Towers 122,962 123,639 123,904 124,230 124,069 0.9 (0.1)

Number of tenants

Bharti Infratel (consolidated) 213,476 205,596 200,778 174,512 174,449 (18.3) (0.0)

Bharti Infratel (standalone) 92,211 88,665 86,053 78,275 77,693 (15.7) (0.7)

Indus Towers 288,727 278,408 273,154 229,136 230,372 (20.2) 0.5

Net tenants added

Bharti Infratel (consolidated) (6,612) (7,880) (4,819) (26,266) (63)

Bharti Infratel (standalone) (2,327) (3,546) (2,612) (7,778) (582)

Indus Towers (10,202) (10,319) (5,254) (44,018) 1,236

Tenants Churn

Bharti Infratel (consolidated) 8,562 9,813 5,657 27,769 2,540

Bharti Infratel (standalone) 2,942 3,956 2,954 8,215 1,510

Indus Towers 13,381 13,945 6,436 46,557 2,452

Gross tenants added

Bharti Infratel (consolidated) 1,950 1,933 838 1,503 2,477

Bharti Infratel (standalone) 615 410 342 437 928

Indus Towers 3,179 3,626 1,182 2,539 3,688

Average sharing factor

Bharti Infratel (consolidated) 2.383 2.297 2.218 2.041 1.890 (20.7) (7.4)

Bharti Infratel (standalone) 2.375 2.293 2.205 2.063 1.946 (18.1) (5.6)

Indus Towers 2.389 2.300 2.228 2.024 1.851 (22.5) (8.6)

Sharing rev./sharing tower/month (Rs)

Bharti Infratel (consolidated) 82,794 79,861 80,014 76,865 74,299 (10.3) (3.3)

Bharti Infratel (standalone) 87,739 83,716 84,316 82,621 83,040 (5.4) 0.5

Indus Towers 79,044 76,874 76,729 72,477 70,237 (11.1) (3.1)

Sharing rev./sharing operator/month (Rs)

Bharti Infratel (consolidated) 34,748 34,110 35,276 36,599 39,266 13.0 7.3

Bharti Infratel (standalone) 36,941 36,511 37,281 38,687 41,632 12.7 7.6

Indus Towers 32,654 32,741 33,753 34,961 37,354 14.4 6.8

Source: Company, HDFC sec Inst Research; Bharti Infratel Consolidated is 42% including proportionate share in Indus

YoY decline in tenancies is owing to Voda-Idea merger as overlapping tenancies of both the companies is considered as one now Growth in tenancies to be led by (a) moderation in churn (b) expansion by Jio and incumbents led by strong data usage growth. With 2x the BTS/tower for Bharti, 4G loading on existing towers is nearing to an end Increase in rental/tenant is owing to (a) loading charges on overlapping tenancies of Voda-Idea and (b) increase in rental for surviving tenants

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Key Model Assumptions

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E

Towers

BHIN standalone 35,119 35,905 37,196 38,458 39,099 39,523 40,281 41,082 42,165

Indus 111,819 113,008 115,942 119,881 122,730 123,639 124,283 125,352 126,741

BHIN + 100% Indus 146,938 148,913 153,138 158,339 161,829 163,162 164,564 166,433 168,905

Net Additions-Towers

BHIN standalone 1,972 786 1,291 1,262 641 424 758 800 1,083

Indus 2,494 1,189 2,934 3,939 2,849 909 644 1,069 1,389

BHIN + 100% Indus 4,466 1,975 4,225 5,201 3,490 1,333 1,402 1,869 2,472

Tenancies

BHIN standalone 63,573 69,137 75,819 81,632 89,263 88,665 76,826 73,209 75,053

Indus 221,511 233,488 253,513 270,006 288,913 278,408 231,029 234,076 246,706

BHIN + 100% Indus 285,084 302,625 329,332 351,638 378,176 367,073 307,854 307,285 321,759

% chg YoY

BHIN standalone 5.7 8.8 9.7 7.7 9.3 (0.7) (13.4) (4.7) 2.5

Indus 3.7 5.4 8.6 6.5 7.0 (3.6) (17.0) 1.3 5.4

BHIN + 100% Indus 4.1 6.2 8.8 6.8 7.5 (2.9) (16.1) (0.2) 4.7

Net Additions-Tenancies

BHIN standalone 3,413 5,564 6,682 5,813 7,631 (598) (11,839) (3,616) 1,844

Indus 7,826 11,977 20,025 16,493 18,907 (10,505) (47,379) 3,047 12,630

BHIN + 100% Indus 11,239 17,541 26,707 22,306 26,538 (11,103) (59,219) (569) 14,474

Closing Tenancy

BHIN standalone (x) 1.81 1.93 2.04 2.12 2.28 2.24 1.91 1.78 1.78

Indus (x) 1.98 2.07 2.19 2.25 2.35 2.25 1.86 1.87 1.95

BHIN + 100% Indus 1.94 2.03 2.15 2.22 2.34 2.25 1.87 1.85 1.90

Sharing revenue/tenant (Rs/month)

BHIN standalone 37,191 37,135 36,911 37,037 37,029 38,143 39,758 42,721 42,817

Indus 31,520 31,683 32,086 32,682 32,914 34,256 35,083 38,306 38,500

BHIN + 100% Indus 32,727 32,914 33,193 33,689 33,877 35,184 36,230 39,383 39,517

Sharing revenue/tower (Rs/month)

BHIN standalone 66,995 69,387 73,193 77,080 81,592 86,320 82,446 78,778 76,257

Indus 62,036 64,118 68,250 72,553 75,825 78,882 72,090 71,369 73,425

BHIN + 100% Indus 63,206 65,383 69,446 73,653 77,222 80,682 74,612 73,190 74,128

Rental Revenue (Rs Mn)

BHIN standalone (x) 27,441 29,569 32,103 34,989 37,968 40,720 39,477 38,458 38,089

Indus (x) 82,313 86,493 93,755 102,658 110,376 116,605 107,237 106,897 111,060

BHIN + 100% Indus 109,754 116,062 125,858 137,647 148,344 157,325 146,714 145,355 149,149

Negative tenancy addition in FY20E is owing to potential exit by Voda-Idea of ~22k additional tenancies

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E

EBITDA (ex-energy) (Rs Mn)

BHIN standalone 17,501 19,969 21,997 24,123 26,516 28,913 27,893 26,627 25,755

Indus 47,057 52,905 58,576 65,170 69,229 72,519 64,371 62,848 65,197

BHIN + 100% Indus 64,558 72,874 80,573 89,293 95,745 101,432 92,263 89,475 90,952

EBITDA Margin %

BHIN standalone 63.8 67.5 68.5 68.9 69.8 71.0 70.7 69.2 67.6

Indus 57.2 61.2 62.5 63.5 62.7 62.2 60.0 58.8 58.7

BHIN + 100% Indus 58.8 62.8 64.0 64.9 64.5 64.5 62.9 61.6 61.0

Energy EBITDA (Rs Mn)

BHIN standalone (x) 2,126 1,562 1,943 936 1,736 2,647 3,086 1,811 1,723

Indus (x) (3,020) 702 3,641 3,990 3,907 4,245 2,136 4,616 4,337

BHIN + 100% Indus (895) 2,264 5,583 4,926 5,643 6,892 5,222 6,427 6,060

EBITDA (incl energy) (Rs Mn)

BHIN standalone (x) 19,627 21,531 23,940 25,059 28,252 31,560 30,979 28,438 27,478

Indus (x) 44,037 53,606 62,217 69,160 73,136 76,764 66,507 67,464 69,534

BHIN + 100% Indus 63,663 75,138 86,157 94,219 101,388 108,324 97,485 95,902 97,012

APAT (Rs Mn)

BHIN Standalone (RPAT) 11,974 11,574 27,252 13,687 27,047 24,399 27,846 15,344 14,484

(-) Dividend from Indus 4,050 2,200 16,407 - 9,510 10,010 11,261 - -

BHIN Standalone (APAT) 7,924 9,374 10,845 13,687 17,537 14,389 16,585 15,344 14,484

Indus PAT (4,632) 8,690 21,933 27,219 28,454 31,643 24,850 25,666 27,000

(-) DDT 1,929 1,048 7,813 - 4,810 5,290 - - -

Indus Adjusted PAT (6,561) 7,643 14,120 27,219 23,645 26,353 24,850 25,666 27,000

Interest net of tax (Rs Mn)

4,774 4,774

BHIN (APAT) + 100% Indus (RPAT) 3,291 18,065 32,778 40,906 45,991 46,032 41,435 36,236 36,710

BHIN (APAT) + 100% Indus (APAT) 1,363 17,017 24,965 40,906 41,182 40,742 41,435 36,236 36,710 Source: Company, HDFC Sec Inst Research *Interest (net of tax) on Idea+Providence stake acquisition payout of Rs 75bn @ 9%

We have assumed Energy EBITDA to decline as the FY18 energy spread at 8% is significantly higher than the management’s guidance of 5-7% Further led by pressure on customer’s core business we expect them to renegotiate on energy

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Valuation Snapshot: BHIN + 100% of Indus

A B C D

Target PE multiple (X) 15.0 20.0 25.0 30.0

Base case Sep-20E PAT (Rs Mn) 36,592 36,592 36,592 36,592

Target Mcap(Rs Mn) 548,877 731,836 914,795 1,097,754

O/s shares (Mn) 2,661 2,661 2,661 2,661

Value per share (Rs) 206 275 344 413 Source: Company, HDFC sec Inst Research

Sensitivity of EPS and TP to 5% change in rental/tenant Avg Rental/tenant/month (BHIN Consol) (Rs) 36,000

FY18E avg tenancy (Nos) 308,000

EBITDA impact of 5% reduction in rentals (Rs mn) 6,653

PAT impact of 5% reduction in rentals (Rs mn) 4,457

EPS impact of 5% reduction in rentals (Rs) 1.7

% of FY18E EPS 12.2%

A B C D

Target PE multiple (X) 15.0 20.0 25.0 30.0

Value per share impact (Rs) 25 34 42 50

Source: HDFC sec Inst Research

We have assumed Idea to opt for its entire 11.15% and Providence for its 3.35% out of 4.85% holding in Indus for Cash to arrive at outstanding shares of the merged entity Accordingly we have taken the O/s shares of BHIN at 2,661mn shares for TP derivation Pricing renegotiations by telcos of largest costs remains a key long-term risk. Jio has considerable network costs advantage vs. incumbents. BHIN runs risk over here. We haven’t factored the same in our TP

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Change in estimates BHIN + 100% of Indus

Rs Mn New Old Change

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

Revenue 146,714 145,355 149,149 144,493 141,709 146,196 1.5 2.6 2.0

EBITDA 97,485 95,902 97,012 95,408 91,647 93,412 2.2 4.6 3.9

EBITDA Margin % 66.4 66.0 65.0 66.0 64.7 63.9 42 131 115

PAT 41,435 36,236 36,710 40,243 34,562 37,462 3.0 4.8 (2.0) Source: HDFC sec Inst Research Peer Set Comparison

COMPANY Mcap

(Rs bn) CMP (Rs)

RECO TP

(Rs)

EPS (Rs/sh) EV/EBITDA (x) RoE (%)

FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E

Bharti Airtel 1,206.6 302 BUY 396 2.7 (4.8) (8.6) (1.0) 109.7 (63.4) (35.0) (295.1) 1.6 (2.6) (4.7) (0.6)

Idea Cellular 486.6 34 BUY 43 (11.6) (73.1) (53.5) (32.4) (2.9) (0.5) (0.6) (1.1) (16.0) (48.5) (26.9) (20.8) Bharti Infratel

486.6 263 BUY 344 13.8 13.8 14.1 14.0 7.0 7.9 8.0 7.8 15.7 16.1 17.9 17.5

Source: HDFC sec Inst Research

Increase in estimates to factor higher than estimated rental/tenant Decline in FY21E PAT is owing to lower other/finance income due to higher dividend payout

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Consolidated Income Statement (BHIN Standalone + 42% of Indus) (Rs mn) FY17 FY18 FY19E FY20E FY21E

Rental revenue 84,326 89,694 84,517 83,354 84,734

Energy reimbursements 49,910 55,202 60,955 62,494 64,442

Net Sales 134,236 144,896 145,472 145,849 149,176

Growth (%) 8.9 7.9 0.4 0.3 2.3

Energy costs 46,533 50,772 56,972 58,745 60,898

Lease rentals 11,628 12,615 12,702 12,988 13,507

Employee costs 4,678 5,002 4,941 5,130 5,386

Other expenses 12,428 12,706 11,945 12,214 12,702

Total Operating Cost 75,267 81,095 86,560 89,076 92,494

EBIDTA 58,969 63,801 58,911 56,773 56,682

EBIDTA Margin (%) 43.9 44.0 40.5 38.9 38.0

EBIDTA Margin ex energy cost (%)

69.9 71.1 69.7 68.1 66.9

EBIDTA Growth (%) 9.0 8.2 (7.7) (3.6) (0.2)

Depreciation 22,625 23,462 22,459 22,473 22,500

EBIT 36,344 40,339 36,453 34,300 34,182

Interest costs (4,413) (97) (2,078) (2,078) (1,530)

Other income 1,456 2,326 2,412 2,613 2,831

PBT 42,212 42,762 40,943 38,990 38,543

Tax 14,742 17,325 15,506 12,867 12,719

APAT 27,470 25,437 25,437 26,124 25,824

EPS 14.9 13.8 13.8 14.1 14.0

EPS Growth (%) 22.2 (7.4) (0.0) 2.7 (1.1)

Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet (Rs mn) FY17 FY18 FY19E FY20E FY21E

SOURCES OF FUNDS

Share Capital 18,496 18,496 18,496 18,496 18,496

Reserves 136,369 151,048 127,780 127,183 130,807

Total Shareholders Funds 154,865 169,544 146,276 145,679 149,303

Long Term Debt 4,447 9,515 13,253 12,804 17,767

Current portion of LT Debt 12,903 19,069 23,513 23,136 -

Total Debt 17,350 28,584 36,766 35,939 17,767

Non-current liabilities 21,408 16,286 15,743 17,040 17,040

TOTAL SOURCES OF FUNDS 193,623 214,414 198,784 198,658 184,110

APPLICATION OF FUNDS

Net Fixed Assets 138,894 134,806 128,759 121,290 101,265

Other non-current assets 11,847 6,968 6,891 7,459 7,459

Trade Receivables 2,179 9,185 12,390 13,411 13,411

Cash & Equivalents 79,181 73,333 61,157 67,769 62,893

Other Current Assets 14,727 15,571 19,391 20,990 10,301

Current Assets 96,087 98,089 92,938 102,170 86,606

Trade Payables 6,890 18,580 21,540 23,316 2,275

Other CL & Provisions 46,315 6,869 8,264 8,945 8,945

Current Liabilities 53,205 25,449 29,804 32,261 11,220

Net current Assets 42,882 72,640 63,134 69,909 75,386

TOTAL APPLICATION OF FUNDS 193,623 214,414 198,784 198,658 184,110

Source: Company, HDFC sec Inst Research

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Consolidated Cash Flow Year ending March (Rs mn) FY17 FY18 FY19E FY20E FY21E

Reported PAT 27,470 25,437 25,437 26,124 25,824

Depreciation 22,625 23,462 22,459 22,473 22,500

Interest (4,413) (97) (2,078) (2,078) (1,530)

Working Capital Change (1,650) (10,736) (20,201) (163) (10,352)

OPERATING CASH FLOW ( a ) 44,033 38,066 25,617 46,355 36,442

Capex (19,499) (19,374) (16,412) (15,004) (2,475)

Free Cash Flow 24,533 18,692 9,205 31,352 33,967

Investments & Others (531) (243) (466) 730 (1,147)

INVESTING CASH FLOW ( b ) (20,030) (19,617) (16,879) (14,274) (3,622)

Capital Issuance (20,318) (0) 0 0 0

Debt Issuance 304 11,234 8,182 (826) (18,172)

Interest 4,413 97 2,078 2,078 1,530

Dividend & others (6,679) (35,628) (31,174) (26,721) (21,053)

FINANCING CASH FLOW ( c ) (22,280) (24,297) (20,915) (25,469) (37,695)

NET CASH FLOW (a+b+c) 1,722 (5,848) (12,176) 6,612 (4,876)

Closing C&CE 79,181 73,333 61,157 67,769 62,893

Source: Company, HDFC sec Inst Research

Key Ratios FY17 FY18 FY19E FY20E FY21E

PROFITABILITY (%)

EBITDA Margin 43.9 44.0 40.5 38.9 38.0

EBITDA Margin excl energy cost 69.9 71.1 69.7 68.1 66.9

EBIT Margin excl energy cost 43.1 45.0 43.1 41.1 40.3

APAT Margin excl energy cost 32.6 28.4 30.1 31.3 30.5

RoE 16.3 15.7 16.1 17.9 17.5

RoIC 18.3 18.8 16.3 17.1 18.2

RoCE 11.4 11.8 11.0 11.6 12.0

EFFICIENCY

Tax Rate (%) 34.9 40.5 37.9 33.0 33.0

Asset Turnover (x) 0.7 0.7 0.7 0.7 0.8

Debtors (days) 6 23 31 34 33

Payables (days) 19 47 54 58 6

Cash Conversion Cycle (days) (13) (24) (23) (25) 27

Net Debt/EBITDA (x) (1.0) (0.7) (0.4) (0.6) (0.8)

Net D/E (0.4) (0.3) (0.2) (0.2) (0.3)

Interest Coverage (8.2) (415.9) (17.5) (16.5) (22.3)

PER SHARE DATA

EPS (Rs/sh) 14.9 13.8 13.8 14.1 14.0

CEPS (Rs/sh) 27.1 26.4 25.9 26.3 26.1

DPS (Rs/sh) 15.0 18.0 15.0 12.0 12.0

BV (Rs/sh) 83.7 91.7 79.1 78.8 80.7

VALUATION

P/E 17.8 19.2 19.2 18.7 18.9

P/BV 3.2 2.9 3.3 3.4 3.3

EV/EBITDA 7.2 7.0 7.9 8.0 7.8

OCF/EV (%) 16.4 2.4 8.7 9.7 7.6

FCF/EV (%) 11.3 (1.6) 5.1 6.4 4.5

FCFE/Mcap (%) 11.1 (1.0) 5.8 6.9 5.0

Dividend Yield (%) 5.7 6.8 5.7 4.5 4.5

EV/Revenues 3.2 3.1 3.2 3.1 3.0

Source: Company, HDFC sec Inst Research

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target

8-Jan-18 373 SELL 310

10-Jan-18 369 SELL 310

18-Jan-18 344 SELL 305

13-Apr-18 337 SELL 280

25-Apr-18 325 NEU 312

6-Jul-18 339 SELL 280

27-Jul-18 286 NEU 306

9-Oct-18 268 BUY 306

25-Oct-18 265 BUY 321

9-Jan-19 298 BUY 345

24-Jan-19 263 BUY 344

RECOMMENDATION HISTORY

200

220

240

260

280

300

320

340

360

380

400

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Au

g-1

8

Sep

-18

Oct

-18

No

v-1

8

De

c-1

8

Jan

-19

Bharti Infratel TP

BHARTI INFRATEL : RESULTS REVIEW 3QFY19

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Disclosure: We, Himanshu Shah, CA & Mansi Lall, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. 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HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE-INB/F/E 231109431, BSE-INB/F 011109437, AMFI Reg. No. ARN: 13549, PFRDA Reg. No. POP: 04102015, IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657, SEBI Research Analyst Reg. 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