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MOSL: BHARTI INFRATEL (Neutral)-Rental EBITDA drags margins

Bharti Infratel: Rental EBITDA drags margins

(BHIN IN, Mkt Cap USD6.4b, CMP INR247, TP INR260, 5% Upside, Neutral) 

 

• Bharti Infratel’s 3QFY20 results were broadly in line. EBITDA margin shrank on contraction in rental margins; net tenancies grew to 744, but were 60-70% below its previous steady run-rate.
• We maintain our revenue estimate for FY20/FY21. Our EBITDA estimate was marginally cut by 2%/3% to factor in the lower rentals and energy margins.

 LTL EBITDA (pre Ind-AS116) flat QoQ at INR14.8b (4% below estimate)

• Proforma consol. revenue at INR36b increased 1.2% QoQ (in-line) due to increase in rental revenue, which was up 2.3% QoQ (in-line) to INR22.1b. Energy revenue remained flat at INR13.9b.
• Proforma consol. EBITDA was flat QoQ to INR14.8b (4% below est.) with 2% QoQ decline in rental EBITDA to INR14.5b (in-line). Energy EBITDA reported profit of INR228m (56% miss) v/s INR45m loss in 2QFY20.
• EBITDA margin shrank 60bp QoQ to 41% (170bp below est.) due to decline in rental EBITDA. Rental EBITDA margin declined 280bp to 64.9% and energy EBITDA expanded 200bp to 1.6%.
• PBT grew 2% QoQ to INR10b (4% below est.), however, PAT declined 22.7% QoQ to INR7.5b due to higher taxes.
• Capex reduced to INR3.9b (INR5b in 2QFY20) despite similar tower adds, as new tenancies/loadings have reduced. Operating FCF stood at INR11.8b.
• Net tenancy adds stood at 744 (v/s est. 310 v/s 159 in 2QFY20); towers added in 3QFY20 stood at 823 to 94,244.