Telecom major Bharti Airtel stock fell around 2 per cent in early deals after it announced its Q3 results, which missed analyst estimates. Bharti Airtel reported 92 per cent surge in consolidated net profit at Rs 1,588 crore for the quarter ended December 2022 as against Rs 830 crore in the same quarter of the previous year, helped by the improved realisation and strong 4G customer additions during the year.
However, despite the strong growth, the profit missed Street expectations of around a 155 per cent rise in its net profit in the quarter under review.
Also, the company’s net profit fell 26 per cent sequentially due to higher operating expenses and an exceptional charge of Rs 669 crore.
Its total revenue rose 20 per cent to Rs 35,804 crore versus Rs 29,867 crore reported in the corresponding quarter last year. Sequentially, the revenue was up 4 per cent. The rise in revenue was ‘backed by strong and consistent performance delivery across the portfolio’, the company said in a statement.
Consolidated EBITDA for the firm also advanced 25 per cent YoY to Rs 18,601 crore during the quarter. It was up 5 per cent on-quarter.
The average revenue per user (ARPU) for the telco grew 18.4 per cent YoY to ₹193 and 1.5 per cent sequentially. Its operating profit rose 24.8 per cent YoY to Rs 18,601 crore. Meanwhile, its operating margin increased 2.1 percentage points YoY to 52 per cent as against 49.9 per cent in the corresponding quarter last year and 51.3 per cent in the previous quarter.
Most brokerages retained their ‘buy’ calls on Airtel. While they expect earnings to be soft in the near term, they believe in Airtel’s long-term growth story.
Prabhudas Lilladher has maintained a ‘buy’ at SOTP based price target of Rs 1,009. Broking house lowered its FY23-25E earnings by 15 per cent/23 per cent/2 per cent even as we 1) lower ARPU growth by 3-9 per cent, given delays in pricing action 2) factor increase in mobile subscriber count by 1-3 per cent and 3) higher depreciation charges by 2-5 per cent.
Remain structurally positive on Indian telecom and Bharti given consolidation in the sector which may lead to regular tariff hikes.
Motilal Oswal has a ‘buy’ call on the stock with a target price of Rs 985, implying an upside of 27 per cent. As per MOSL, in the near term, the stock should see an overhang with moderate FCF (free cash flow) generation, due to softening earnings. This was a result of slower 4G additions, limited tariff hikes and increased capex intensity towards 5G rollout and rural coverage, it noted. However, it forecasted that over the next two years, the company is well poised to gain from sector tailwinds, with an EBITDA CAGR of 13 per cent over FY23-25E, driven by a combination of market share gains, improved ARPU, led by premiumization of customers and tariff hikes and non-wireless segments.
It maintains EBITDA estimates, led by a healthy 14 per cent/13 per cent growth in India mobile/Africa growth.
“We value BHARTI on an FY25E basis, assigning an EV/EBITDA ratio of 11/5 to the India Mobile/Africa business, and arriving at a SoTP-based TP of INR985. We reiterate our Buy rating on the stock. Near-term valuation multiples have remained under pressure, but long-term growth should garner better valuations,” it said.
According to ICICI Securities, Airtel continues to report a healthy performance on the Indian wireless business front with resilient and industry-leading KPIs in terms of India post-paid/4G subscribers, ARPUs and margins. Management commentary on overall growth drivers would be the key monitorable ahead, the brokerage firm said in a note. “We remain constructive on Airtel given the disproportionate benefits of market consolidation in the telecom sector,” it said.
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