BackBharti Airtel Q4 results strong: Brokerages give their verdict on stock
Brokerages expect that the company’s earnings growth to remain soft in the near term due to slow market share gain and limited tariff hikes, but the company is posed to benefit from the sectoral tailwinds going ahead.
PremiumTelecom major Bharti Airtel reported a consolidated net profit of ₹3,005.6 crore in the quarter ended March 2023, registering a growth of 50% year-on-year (YoY). The company’s consolidated revenue increased 14.3% YoY to ₹36,009 crore.
Sequentially, the telco registered bottomline growth of over 89% and the topline growth of 0.6%.
The Jan-Mar quarter was a no-tariff-hike quarter for Bharti Airtel, yet its mobile revenue grew 11% YoY and ARPU was up 8.4% YoY led by higher 4G and postpaid subs addition.
Also Read: Bharti Airtel maintains Arpu in Q4, but needs a tariff hike
"Our consolidated revenue grew sequentially by 0.6%, while the EBITDA margin expanded to 52.2% despite there being two fewer days in the quarter. Our focus on acquiring quality customers has resulted in 7.4 million new 4G customers, as we exit the quarter with an industry leading ARPU of ₹193," said Gopal Vittal, Managing Director, Bharti Airtel.
The company’s board also recommended a final dividend of ₹4 per for FY 2022-2023.
Read here: Bharti Airtel Q4FY23 Results: Net profit up 89% sequentially, declares dividend
Bharti Airtel share price has risen more than 14% in the last one year. The stock is around 7% away from 52 week high and nearly 27% away from 52 week low.
Brokerages expect that the company’s earnings growth to remain soft in the near term due to slow market share gain and limited tariff hikes, but the company is posed to benefit from the sectoral tailwinds going ahead.
Here’s what brokerages have to say on Bharti Airtel’s Q4.
ICICI Direct
ICICI Direct maintained a ‘Buy’ rating on Bharti Airtel with an unchanged target price of ₹960 per share with EV/EBTDA multiple at 9.5x for the India business.
The brokerage believes Bharti Airtel has been disciplined in capital allocation, which resulted in strong FCF generation and steady drop in leverage, which we believe will help create strong shareholder value in the next few years.
“Bharti Airtel has initiated measures to combat inefficiency at certain channels, which should improve margins going forward. We believe 5G use-cases for enterprise will grow exponentially in the future, and higher market share in the B2B business will be key to monetise 5G investment," ICICI Direct said, adding that market share loss in India mobile business and rise in competitive and regulatory intensity will be risks.
Motilal Oswal Financial Services
Motilal Oswal retained a Buy call on the stock with a target price of ₹950 per share, assigning an EV/EBITDA ratio of 10x/5x to the India Mobile/Africa businesses.
“In the near term, Bharti Airtel’s earnings should soften due to moderating growth from 4G mix benefits, low probability of tariff hikes and softening market share gains. Moreover, increased capex should lead to a moderation in FCF generation and the pace of deleveraging in the near term. As a result, valuations may remain under pressure," Motilal Oswal said.
However, the brokerage house believes over the next two years Bharti Airtel is well poised to benefit from sectoral tailwinds coming from market share gains, improved ARPU, led by premiumization of customers, tariff hikes, and non-wireless segments.
Yes Securities
Yes Securities has an ‘Add’ rating on the stock and target price of ₹930 per share, implying a target EV/EBITDA multiple of 8.4x FY25e, vs 5.8x as implied by CMP.
It estimates an operating earnings CAGR (FY23-25e) of 22%, backed by expectations of continual subscriber gain and ARPU improvement. It also estimates an ARPU of ₹220 and ₹256 in FY24e and FY25e, respectively, factoring in upward revison in India mobile tariff.
“While Bharti believe that current ARPU levels are suppressed and expects industry to take cooperative effort to address the same, but in the interim the company has decided to keep operating expense in check through ‘war on waste (wasteful expenditure)’ to maintain/improve operating margins," Yes Securities said.
Prabhudas Lilladher
Prabhudas Lilladher cut its FY24-25 earnings estimates by 9.8%/11.7%, as it lowered ARPU growth by 2.4-3.7% given delay in pricing action and factor in higher finance charges.
“We remain structurally positive on Indian telecom and BHARTI given favorable competitive structure. Also aggressive customer focused growth plans will create a virtuous cycle of growth for Bharti," the brokerage said.
It maintained ‘Buy’ and cut the target price to ₹875 from ₹977 earlier.
At 10:25 am, the shares of Bharti Airtel were trading 1.10% higher at ₹801.00 apiece on the BSE.
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