Bharti Airtel Ends Lower Despite Adding More Subscribers Than Jio, Vi In Q4
Bharti Airtel gained as much as 2.9% in early trade, but pared all gains to dip as much as 2.5% intraday before closing 1.5% lower
Shares of Bharti Airtel Ltd. gave up all gains to end lower on Wednesday, even as analysts reiterated 'buy' calls on the stock after the fourth quarter, citing higher 4G user additions than peers and net debt reduction.
The telecom operator's net profit more than doubled sequentially in the quarter ended March 31, beating analysts' estimates, aided by tariff hikes and customer acquisitions.
Bharti Airtel Q4 Highlights (Consolidated, QoQ)
Net profit jumped 142% sequentially to Rs 2,007.8 crore.
Revenue increased 5.47% to Rs 31,500 crore.
Operating profit increased 9% to Rs 16,040 crore.
Ebitda margin widened to 50.92% from 49.23% as of December.
The company's board also approved the reappointment of Gopal Vittal as managing director and chief executive officer for five more years—from Feb. 1, 2023 to Jan. 31, 2028—a sign of continuing stability.
"The quarter witnessed healthy growth. Our execution was strong despite the Covid-19 effect. We grew across competitively in all businesses and gained market share. We added Rs 13,440 crore to our top line over the last year," Vittal said in a post-earnings webinar.
On the government's 5G spectrum auction, Vittal said TRAI's airwave auction reserve prices were "disappointing". "We had expected substantial discounts. Though the government did lower prices, it's still not what we wanted."
Bharti Airtel, Vittal said, is future-proof, with its systems set up for 5G. There will be at least one more round of tariff hike this year. "It’s crucial in Airtel reaching the goal of an ARPU of Rs 200 and ultimately Rs 300."
Shares of Bharti Airtel gained as much as 2.9%, the most since April 20, in early trade, but pared all gains to dip as much as 2.5% intraday before closing 1.5% lower at Rs 696.15 apiece.
Of the 34 analysts tracking the company, 30 maintain a 'buy', three suggest a 'hold' and one recommends a 'sell', according to Bloomberg data. The avearge of the 12-month consensus price target implies an upside of 24.1%.
Here's what analysts made of Bharti Airtel's Q4 FY22 results.
Motilal Oswal
Rates 'buy'.
4G subscriber additions stood at 52 lakh, reaching 20.1 crore subscribers—62% of total subscribers. This was better than peers. While Jio saw a decline in subscribers, Vodafone Idea added 11 lakh 4G subscribers only.
Despite robust data traffic volumes of 12b GB with 19 GB/user, the data traffic/subscriber was 50% below Jio, highlighting healthy network capacity and room for improvement. Airtel is now focused on increasing penetration of unique broadband towers (by adding about 7,000 towers), but the aggressive broadband base station is behind.
Airtel’s net debt (excluding lease liability) saw limited reduction due to Indus Towers’ stake acquisition and AGR interest capitalisation. With the pending rights issue call money of Rs 16,000 crore, the 5G auction investment should not dent the deleveraging trend.
In a market witnessing SIM consolidation, Airtel added net/5G subscribers of 30 lakh/50 lakh, respectively, thus experiencing higher mobile revenue growth of 12% versus peers as well as gaining further market share.
Dolat Capital
Rates 'buy' with a target price of Rs 840 apiece, implying a potential upside of 19%.
Jio and Vodafone Idea reported 8/5.4% sequential revenue growth. Bharti’s revenue growth has been higher than Jio in seven out of eight trailing quarters.
DTH business revenue declined primarily on account of shift of some key channels to free to air and to some extent on account of OTT.
Administrative costs increased by 19% sequentially due to higher gross subscriber addition and increased competitive intensity on-ground for subs and bad debt provision.
Key things to watch-out for: Potential value unlocking from unicorns within Bharti, 5G spectrum auctions, outlook on subscriber and ARPU growth
Bharti remains best-positioned to capitalise on the potential upside from the weakness of Vodafone Idea and/or tariff hikes.
UBS
Maintains 'buy' with a target price of Rs 855 apiece, implying a potential upside of over 21%.
Despite the tariff hike, Bharti added 31 lakh subs in Q4 vs subscriber declines of 1 crore and 34 lakh for Jio and Vodafone Idea respectively, indicating its better quality customer base.
Overall, a healthy set of results that were slightly ahead of estimates on most metrics.
Believes Airtel is well placed in the sector, with a high quality customer base and strong balance sheet.
Nomura
Maintains 'buy' with a target price of Rs 855 apiece, implying a potential upside of over 21%.
Q4 performance inline as better show from India wireless and homes offsets weaker Africa.
Among the three private telcos, Airtel's revenue and subscriber market share inched up further by 55 basis points and 70 basis points sequentially.
Will closely monitor management’s commentary on further tariff hikes; trend on 4G upgrades amid rising smartphone prices; 5G spectrum auction and 5G trial updates; performance of various sub-segments under Airtel Business and Bharti’s digital assets.
Bharti continued to grow ahead of peers for third successive quarter and with impending 5G launch, and the company’s market share gains will accelerate, given Vi’s capex constraints.
With improved free cashflow generation, cashflow relief from moratorium on government dues and ongoing rights issue, we think Bharti remains well-placed to compete with Jio on 5G rollouts.
CLSA
Maintains 'buy' with a target price of Rs 953 apiece, implying a potential upside of 35%.
In Q4, Bharti prepaid Rs 8,800 crore in deferred spectrum liabilities and gearing is comfortable at 2.5x Ebitda.
With the Q4 beat, CLSA raises FY23/24 forecasts by 4-8% and with Bharti’s 4G penetration at 62% of its own India mobile subs and ARPU growth, CLSA forecasts 12% CAGR in consolidated Ebitda by FY25.
Jefferies
Maintains 'buy' with a target price of Rs 880 apiece, implying a potential upside of 25%.
As expected Bharti delivered strong growth in Q4 on the back of tariff hikes. Its subscriber mix continued to improve led by its network investments.
Homes and enterprise segments surprised positively, while DTH and Africa disappointed. Free cash flow generation was strong and leverage at 2.5x was comfortable.
Lowers Ebitda estimates by 1-2% on higher diesel prices and expect Bharti to deliver 20% EBITDA CAGR over FY22-25.
JPMorgan
Maintains 'buy' with a target price of Rs 900 apiece, implying a potential upside of 27.3%.
Believes consistent share gains from superior network quality, improving ARPU from implicit tariff hikes and 4G upgrades and impressive digital metrics should drive a re-rating.
Payments bank saw strong sequential growth in gross merchandise value and monthly transacting users and remained profitable.
India wireless Ebitda margins surprised by 50 basis points, while capex was less than feared at just Rs 26,200 crore suggesting 5G surge is sometime away. Bharti should enjoy sustained share gains in wireless and homes.
Citi
Maintains 'buy' with a target price of Rs 875 apiece, implying a potential upside of 23.9%.
Await management outlook on the upcoming 5G spectrum auction for which reserve pricing has disappointed.
Remain constructive on the stock and see room for the market to take a more optimistic view on the emerging enterprise opportunity, which remains underappreciated, potentially driving upgrades down the line execution picks up, as well as delivering on its digital aspirations which could additionally aid valuations. Execution in other business segments, meanwhile, remains solid.
Key to monitor in the coming months: 5G spectrum auction, macro backdrop and any implications for future tariff hikes, trends in 4G upgrades, and further stake acquisition in Indus Towers.