FREE

MOSL: BHARTI INFRATEL (Neutral)-A dampener in 1QFY19, tenancy exits is also a near-term worry

Bharti Infratel: A dampener in 1QFY19, tenancy exits is also a near-term worry

(BHIN IN, Mkt Cap USD7.7b, CMP INR287, TP INR305, 6% Upside, Neutral)

 

• Energy segment drags consol. EBITDA: Pro forma consol. revenue was flat QoQ at INR36.7b (in-line). Both rental and energy revenues were flat on a sequential basis. Consol. EBITDA declined 5% QoQ to INR15.2b (5% beat) due to a fall in energy EBITDA. Consequently, EBITDA margin contracted 210bp QoQ to 41.4%. Consol. PAT rose 5% QoQ to INR6.4b (5% beat). However, adjusted for the exceptional item in 4QFY18, PAT was flat on a sequential basis.
• Smaller players’ shutdown hits tenancy: Net co-locations declined by 4,818 (-2% QoQ) due to 5,657 tenancy exits (due to shut down by smaller players) v/s meager 839 gross adds (1,933 in 4QFY18). Yet, rental EBITDA (INR14.7b) was up 2% QoQ, partly due to revenue from discontinued tenants (6,672). Accordingly revenue will be adjusted downward in the coming quarter. Energy EBITDA margin contracted 730bp QoQ to 3.7%, mainly as 1Q is a seasonally weak.
• Concall highlights: (1) 1QFY19 revenue accounts for 6,672 discontinued sites. Thus, 2Q may see downward adjustment (~3%). (2) Tenancy adds have reduced as Bharti and Vodafone-Idea are in the process of integrating networks of merger/acquisition-related assets. (3) Most of the 4G rollout is happening on existing sites. However, expect fresh 4G site addition to drive higher co-locations once the Vodafone-Idea merger is complete. 4) Management hinted that network rollout by top players will have to accelerate to support data growth.