Bharti Airtel, India’s largest private integrated telecom solutions company, reported its Q2FY09 results on Friday.
The company recorded an impressive 42.3% y-o-y growth in consolidated topline (6.3% q-o-q growth), driven mainly by the Mobile Services Business unit, which grew by an 44% y-o-y (5.3% q-o-q).
The company recorded strong mobile subscriber additions during the quarter, which grew by 58.5% y-o-y (11.7% q-o-q) to 77.5 million.
This was the case, even as gross mobile ARPUs contracted by over 10% y-o-y (nearly 6% q-o-q) to Rs331 per user per month.
The other business segments of the company - Telemedia, Long distance and Enterprise, also pulled their weight, growing at rates between 20-75% y-o-y.
However, EBITDA margins declined 175bp y-o-y (51bp q-o-q) on account of higher network expansion costs.
Due to the margin contraction, as also higher interest costs (up by as much as 410% y-o-y and 213% q-o-q) and significant forex losses to the tune of Rs586 crore, Bottomline growth, while decent at 26.8% y-o-y (1.1% q-o-q) trailed topline growth. A tax write-back of Rs301 crore boosted the bottomline.
At the CMP, the stock is trading at 11.2x FY10E EPS, 5.8x FY10E EV/EBITDA and at an EV/subscriber of $162.6 on our FY10E subscriber base.
We maintain a BUY on the stock, with a revised 12-month Target Price of Rs990 (Rs1,105), including Rs809 as the core business value (14x P/E multiple) and Rs181 as the towerco valuation.