Following the company’s quarterly results, CLSA has revised its target on the stock to Rs 860. Jefferies also has the same target as the subscriber mix improved and the growth outlook is strong.
Among the key positives in the results included steady Ebitda despite no tariff hikes, healthy show in the Africa geography, strong data traffic volumes and superior network capacity.
What was disappointing, as Motilal Oswal Institutional Equities pointed out, was the high capex and spectrum spend, which has limited free cash flow (FCF) growth. “Capex continued to increase to Rs 7,000 crore for the quarter. Nevertheless, FCF post-interest grew to Rs 2,200 crore from Rs 1,700 crore QoQ, although this is much lower than the company’s potential. Along with a Rs 10,500-crore increase in deferred spectrum liability, this has increased net debt by Rs 4,830 crore to Rs 1,31,300 crore. In the last year, despite 25 per cent Ebitda growth, FCF generation and deleveraging have been disappointing. These are expected to improve,” Motilal Oswal said.
Bharti Airtel on Tuesday reported a 300 per cent quarter-on-quarter rise in consolidated net profit of Rs 1,134 crore for the quarter ended September, which was in-line with the Street’s estimate. The telecom operator reported a 5.4 per cent sequential growth in consolidated revenue from operations, at Rs 28,326 crore, for the reported quarter — also above analysts’ expectations. 4G subscriber additions stood at 81 lakh, recovering from 50 lakh in the June quarter but slower than the 1.2-1.3 crore additions last year. In total, 4G subscribers reached 19.25 crore, which was 62 per cent of Bharti’s total subscribers. ARPU (average revenue per user) came in at Rs 153, up 5 per cent sequentially.
Gopal Vittal, managing director and chief executive officer-India and South Asia at Bharti Airtel, said his company’s strategy of focusing on quality customers has been validated by the strong price flow and ARPU increase in its wireless business. Vittal further said Bharti Airtel’s India business no longer has any bank debt and would be exploring more options to maintain comfortable leverage and manage costs.
Data traffic grew 5 per cent QoQ to 112.7b GB, with 19.1 GB per user. Bharti’s data traffic and data subscribers are nearly half that of Reliance Jio, with the capacity gap being far smaller. Motilal said it highlighted a better network experience. This brokerage has a buy rating on the stock.
CLSA said Bharti’s Q2 beat added to its revenues and Ebitda forecasts but minorities and tax suggested a downside risk to profit. “Bharti’s compelling cashback offer across 150 smartphones and Jio’s high upfront monthly cost for JioPhone Next will likely keep Bharti 4G subscriber momentum strong. What is awaited is the tariff hike in prepaid data. Led by Bharti’s 4G penetration of 60 per cent of its own India mobile subscriber base, along with Arpu growth, we forecast a 15 per consolidated Ebitda CAGR by FY24,” CLSA added.
