Airtel has a strong balance sheet: Goldman Sachs

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Bharti Airtel, is staying strong and growing and has a robust balance sheet, said broking house, Goldman Sachs.




Airtel has a robust balance sheet and a "best-in-class" spectrum footprint position which favors Bharti Airtel for future network roll-outs and market share gains. With declining CAPEX intensity and rising margins on stable revenue growth, we expect Bharti to be FCF (Free Cash Flow) positive in the financial year 2020-21, Goldman Sachs said in a report. 

The report said the telecom operator has a strong wireless business growth potential.

"We forecast a 30 percent EBITDA growth CAGR for India wireless (46 percent of FY19E revenue) in FY19-22E driven by market share gains, customer upgrades/better customer monetization in data, and tariff hikes. With a recovery in India wireless, steady growth in Africa, and stable non-wireless businesses, we forecast Bharti to deliver an 8 to 18 percent revenue/EBITDA CAGR in FY19-22E", it said.

The broking house also said the telco has a solid growth outlook for Africa. "We forecast a 9 to 11 percent revenue/EBITDA CAGR in FY19-22E for Bharti's Africa business (24 percent of FY19E revenue) driven by data and mobile money." 

"Its valuation is at t 8.5x CY20E EV/EBITDA, Bharti trades higher than its own historical average (of 7.3x) and its Asian telco peer median (of 7.1x). However, we expect Bharti's EBITDA growth over the next two-to-three years to be more than 3x its Asian telco peers and view a higher multiple as justified; Bharti trades in line with Asian peers on CY21 EV/EBITDA. 

"Our 12-month Discounted Cash Flow-based Trading Price of Rs 415 implies 15 percent upside; our bull/bear scenarios suggest 40 percent upside vs. 13 percent downside."


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