Analysts bullish on Bharti Airtel despite Q1 loss; here's why

Analysts bullish on Bharti Airtel despite Q1 loss; here’s why


New Delhi: Analysts continue to remain bullish on Bharti Airtel after it posted a ‘positive surprise’ in India mobile revenue growth on Wednesday, despite April-June quarter being the full-blown period in terms of lockdown restrictions.“The key positive surprise in the results was 2% QoQ growth in ARPU (Average Revenue Per User) to Rs 157, the highest in 13 quarters, led by the residual benefit of tariff hikes in December 2019,” Jefferies said in a note.

Brokerage firm CLSA expects Airtel’s India mobile ARPU to rise above Rs 181 in next two fiscal years.

“India mobile once again surprised positively and drove the bulk of the beat, with revenues down just 1% quarter-on-quarter versus our expectation of a 3% decline,” Citi Research said.

This is particularly impressive given the challenges faced by migrant workers in the quarter as well as the likely impact on international roaming revenues, it added.

Key financial numbers reported by Bharti Airtel for the first quarter this fiscal had marginally beaten Street estimates which was expecting a decline.

Consolidated revenue at Rs 23,980 crore, was up 0.5% on-quarter against an expected decline of 0.2%. Earnings before interest, tax depreciation and amortization (EBITDA), at Rs 10,410 crore, was also ahead of Street expectation of Rs 10,320 crore. EBITDA margin at 43.5% was up 30 basis points on-quarter.

Net loss, however, widened to Rs 15,933 crore on account of one-time expenses related to statutory dues.

The telecom company’s shares were trading 2.72% lower at Rs 550.95 per share on the BSE during the afternoon trade on Thursday.

Bharti Airtel’s data traction remained strong with the company gaining two million 4G data subscribers to 138 million, and with data traffic growth of 12% QoQ and usage at 16.7GB/month/subscriber (highest in the industry), CLSA said in a report. Total subscriber base though fell 1.3% to 279 million.

“A solid performance amid challenging times once again highlights the robustness of Bharti’s India mobile business, the quality of its subscriber base, and benefits of having a more diversified revenue stream,” Citi Research said.

Airtel Business also surprised positively with a 4% QoQ jump in revenues, said Jefferies. “Digital TV reported healthy growth in subscribers (+5% YoY) and underlying ARPUs (3.5% YoY), driving 9% YoY growth in underlying revenues.”

Edelweiss believes Bharti is able to leverage its superior quality network to gain market share.

Reports also highlighted that Airtel’s net debt to Ebitda ratio is comfortably below 3x mark.

“After last quarter’s negative FCF (free cash flow) and net debt increase, it has resumed the trend of positive FCF and deleveraging of Rs26billion/Rs23billion with net debt to EBITDA now standing at 2.7x,” Motilal Oswal Financial Services said in a report.

Source: ET Markets

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