CLSA downgrades Bharti Airtel to 'sell'; regulatory risk weighs
Bharti Airtel Q3 were results were disappointing as revenues per minute dropped while network traffic was up mere 2.8% QoQ, CLSA said in a note.
Asia Pacific-broker CLSA focused that exorbitant spectrum prices need for further payments and re-farming threaten the telecom major at a time when Bharti's ROCE is down to a low of 6 per cent.
The brokerage firm downgraded the stock from 'underperform' to 'sell' with a target price of Rs 300. CLSA is of the view that although competition has eased and promotional offers are reducing, sustained tariff hikes are not on cards.
"We cut our FY13/15 EBITDA estimates by 4 per cent and 7 per cent respectively. Meanwhile, post 20 per cent rally and valuations at 30x PE and 7x EV/Ebitda for FY14CL," CLSA says in a note.
Last week, Bharti Airtel Ltd reported a 72 per cent drop in net income at Rs 284 crore during the October-December quarter, disappointing market expectations. High interest costs on loans, forex fluctuation and a higher taxable income dented the telecom major's margins.
"Over 9MFY13 consolidated margins are down 255 bps YoY to 30.6 per cent primarily led by 21 per cent YoY jump in network operating costs and 18 per cent YoY increase in SG&A," said the CLSA note.
Bharti's India effective tax rate was 29 per cent but led by Africa consolidated was hefty at 54 per cent. Bharti Airtel's lower-than-expected 3QFY13 performance and jump in interest and tax has led to a slash in FY13-15CL Ebitda estimates by 4-7% and PAT by a sharper 30-41%.
According to CLSA, the next 2G auction is in March and will include re-farmed 900 spectrum in metros. As it is being combined with 2G license renewals, Bharti will be compelled to participate.