Brokerages remain bullish on Bharti Airtel post Q4 results

• Brokerages continue to be bullish on Bharti Airtel’s prospects after India’s second-largest telecom company’s Q4 results.
• Airtel beat analyst estimates with a net profit of ₹3,006 crore for the March quarter, up 50% YoY.
• Airtel’s robust 4G and postpaid subscriber additions, improving free cash flows and elevated growth outlook should help its metrics remain higher than peers, according to analysts.

Brokerages continue to be bullish on Bharti Airtel’s prospects a day after India’s second-largest telecom company posted its Q4 results. The telco’s earnings has the street buzzing, with Airtel’s shares rising 1.3% early on Wednesday even as the benchmark indices trended lower.

Airtel beat analyst estimates with a March-quarter net profit of ₹3,006 crore, up 50% year-on-year (YoY). The topline was in line with analyst estimates, rising 14% YoY and 0.5% sequentially to ₹36,009 crore.

Post the results, most brokerages sounded an optimistic note about the telco’s prospects, underlining positives like a strong addition in 4G subscriber base and improving data consumption.

The analysts at Jefferies noted that Airtel’s Q4 results “were in line with estimates as a higher-than-expected performance in India was offset by slower growth in Africa.”

Strong 4G subscriber additions, slower churn

Airtel continued to report a strong increase in its 4G subscriber base – it added 7.4 million subscribers during the March quarter. This is higher than market leader Jio’s net addition of 6.4 million subscribers during Q4.

Subscriber churn also moderated to 2.8%, down from 3% in the previous quarter.

“4G net subscriber additions of 7.4 million sequentially were the strongest in the last six quarters. (The) Company added 6.63 lakh subscribers in the postpaid segment, which has continued to see traction as a segment over the past few quarters,” said the analysts at Morgan Stanley.

The brokerage maintained that despite a rise in capital expenditure on account of 5G, Airtel’s free cash flow position “will improve sharply” in FY24.

Airtel also declared a dividend of ₹4 per share, which is the highest in the last five years.

Analysts at Goldman Sachs peg Airtel’s EBITDA to grow at a compounded annual growth rate (CAGR) of 18% over the next two years. This is “significantly faster” than the global telco average of 4% to 5%, the brokerage said in a note. EBITDA refers to earnings before interest, taxes, depreciation and amortisation.

What to watch out for: Capex, tariff hikes

Airtel has aggressively accelerated its 5G rollout, taking the pole position as its coverage extends to over 3,000 cities and towns. The telco also said it will complete its pan-India rollout by the end of 2023, three months ahead of its initial plans.

The 5G rollout has led to a rise in the capital expenditure of its Indian unit, which is up 11% sequentially at ₹9,000 crore.

Analysts say that while Airtel’s capex will remain elevated in the near term due to the 5G rollout, it will decline to 17% of revenue by FY25, from 27% in FY23.

The consensus on tariff hikes remains unchanged, with analysts expecting a hike in the second half of 2023. However, management commentary in the post-earnings call slated for later in the day will be eagerly watched.

Tariff hikes, if any, will boost the company’s average revenue per user (ARPU), which has stagnated sequentially at ₹193.

Brokerages largely bullish

Most brokerages continue to be bullish on Bharti Airtel’s prospects, with estimates of an upside of up to 28% on the company’s stock over the next 12 months.

“With India wireless market repair, Bharti Airtel’s free cash flow has improved and we believe it is well placed to compete with Reliance Jio on 5G rollouts,” said analysts at Kotak Institutional Equities.

An average of brokerage estimates gives a target price of ₹898 in the next 12 months, which is an upside of 14% from the current market price of ₹790.


Source: Brokerages / *Upside compared to current market price of ₹790 as on May 17, 2023

$BHARTIARTL.NSE Looking good for long term investment

— (@Breakoutrade94) May 17, 2023

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