Bharti Infratel: good results, but priced in - Livemint

While initial orders have started coming from Reliance Jio, it's still too early to say how much Bharti Infratel may benefit from the deal. Photo: Mint

Bharti Infratel Ltd, which owns telecom towers, sprang a positive surprise on earnings, with net profit growing by as much as 15.1% sequentially to Rs.472 crore, largely due to better-than-expected margins. Analysts at Deutsche Bank AG and Kotak Institutional Equities had estimated earnings of Rs.409.5 crore and Rs.412.5 crore, respectively.

Most analysts had assumed margins would drop quarter-on-quarter, partly because the December quarter operating profit included a one-time income of Rs.20 crore. Kotak had estimated a margin drop of 90 basis points. Instead, the company reported a 20 basis point increase in margin. There are no one-offs in the operating profit for the March quarter, and the gains are mainly owing to operational efficiencies. One basis point is one-hundredth of a percentage point.

Revenue grew by 2.2%, more or less in line with estimates, and on the back of an increase in both the tenancy ratio and the revenue earned per tower. The steady growth should please investors, who have recently been excited about the company's growth prospects thanks to its deal with Reliance Jio Infocomm Ltd.

Bharti Infratel shares have risen by nearly 30% in the past four months, after the Bharti group announced a broad partnership deal with Reliance Jio. In March, a more definitive deal about tower-sharing was announced, and investors were heartened that pricing will be based on market rates. Earlier, when Reliance Jio had struck a similar deal with Reliance Communications Ltd, some analysts were disappointed with the implied rents, which appeared to far lower than market rates.

Even so, the rise in the company's shares seems too much. At current prices, Bharti Infratel has exceeded the price target of Rs.200 of Kotak Institutional Equities, which is fairly sanguine about the company's prospects. The relatively high valuation should curb some of the excitement about the quarterly results.

Investors seem to be expecting a bit too much from the Reliance pact. While initial orders have started coming from Reliance Jio, it's still too early to say how much Bharti Infratel may benefit from the deal.

via Business - Google News http://ift.tt/1jVEN2o

Put the internet to work for you.

via Personal Recipe 2910127