Networth Stock Broking has come out with its earning estimates on the telecom sector for the quarter ended June' 07. According to the report Bharti Airtel is expected to post net profit of Rs 1439.24 crore (Rs 14392.4 million) in the first quarter versus Rs 1353.9 crore (Rs 13539 million) in the previous quarter.

During the same quarters its net sales are seen up at Rs 5051.63 crore (Rs 50516.3 million) as against Rs 4459.8 crore (Rs 44598 million).

Highlights of the quarter

* Bharti Airtel is expected to report a 12.2% growth QoQ in revenues backed by strong growth in mobile revenues & higher subscriber additions during the quarter.
* Bharti is expected to add 5.45 mn subscribers in the mobile segment during the Q1FY08 as against 5.17 subscribers added in Q4FY07.
* We expect overall EBITDA margins to grow by 70 bps QoQ to 42.2%, driven by the strong growth in mobility revenues.
* We expect a 1.5% fall Q0Q in ARPUs in the mobile segment and a 2% fall in ARPUs in the Broadband & Telephony segment.
* In the ILD segment, pressure on RPM will continue to be there due to stiff tariff war and slashed call rates on global calling cards.
* Overall net profit is expected to grow moderately by 6.3% QoQ, considering the impact of higher finance charges & tax rate during the quarter.

Valuations

Bharti Airtel continues to capitalize on the growth momentum in the Indian telecom space by adding strong numbers month over month and increasing its market share. Bharti is expected to increase its population coverage to 75% by the end of this fiscal year from the current coverage of 60%. We believe Bharti is well positioned to lead this growth rally and will continue its market leadership going ahead. At current market price of Rs. 866.4, stock is trading at 25.4x and 19x of its FY08E and FY09E earnings respectively.

We recommend buy on the stock with 12 months target price of Rs 1003, valuing the FY09E earnings 22x.