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Wednesday, January 10, 2018

HDFC Sec retains sell on Bharti Infratel, reduces target to Rs 310 despite 22% fall in last 2 months

The share price has declined from a peak of Rs 480 to Rs 373 (22 percent) in last two months.

Bharti Infratel shares declined 1.5 percent to close at Rs 368 on Tuesday after HDFC Securities has reiterated its Sell rating on the stock with revised target price at Rs 310 (from Rs 387 per share) despite sharp fall in last two months. INDIAN STOCK TIPS

The share price has declined from a peak of Rs 480 to Rs 373 (22 percent) in last two months.

"Target price is based on 20x Dec-19E EPS (Rs 356) for business as usual (versus 24x earlier) less impact of Rs 60 per share from Vodafone-Idea merger (versus Rs 39 per share earlier) and likely acquisition of Vodafone-Idea stake in Indus at enterprise value of Rs 50 lakh per tower (+Rs 15 per share)," the research house said.

It further said the key reason for the de-rating is instant loss of tenancies on merger of Vodafone-Idea and impact of Reliance Communications and Aircel businesses’ scaling down.

This would push back Bharti Infratel's EBITDA and earnings by couple of years, it feels.

"Street's optimism on Bharti Infratel is driven by the prospect of (a) better capital allocation via the likely acquisition of Vodafone and Idea’s stake in Indus (b) Bharti Infratel's parent Bharti Airtel diluting in favour of a consortium of investors and (c) realisation of exit penalties from Vodafone-Idea on merger. However, these events are probable; while loss of tenancies certainly warrants de-rating. A higher price for Indus acquisition would be negative. A lower price would be sentimentally negative as Bharti Infratel holds 42 percent in Indus," HDFC Securities said.
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