IGI Logo

Healthy customer growth; Outlook positive

Bharti Airtel Limited is a leading global telecommunications company with operations in 18 countries across Asia and Africa. The company had around 471mn customers across its operations at the end of Q4FY21.

* Q4FY21 consolidated revenue grew 11.9% YoY, driven by sustained growth in customer base and higher data usage.

* EBITDA margin expanded 610bps YoY to 47.9% benefitted from lower access charges and employee costs. Net profit increased to Rs. 759cr (vs. 5,237cr loss in Q4FY20).

* Robust growth in customer base, increasing data usage coupled with expected tariff hikes improves the outlook for the business. Also, strong performance of Indian wireless business could drive the consolidated numbers despite near-term weakness in ARPU. We believe Airtel’s longterm growth story remains intact and hence reiterate our BUY rating on the stock with a revised TP of Rs. 676 based on SOTP valuation.

Topline remains resilient

Bharti Airtel’s Q4FY21 revenue rose by 11.9% YoY to Rs. 25,747cr, mainly driven by sustained growth in customer addition partially offset by reduction in ARPU (Rs. 145 in Q4FY21 vs Rs. 154 in Q4FY20). Revenue from India mobile services increased by 8.7% YoY to Rs. 14,080cr, whereas African mobile service business reported revenue of Rs. 7,602cr (+17.2% YoY). Homes services revenue grew by 5.0% YoY to Rs. 601cr on account of double digit growth in customer base (+27.0% YoY to 3.07mn). Due to lower-than-expected ARPU and decline in customer base, Digital TV services revenue decreased by 2.8% to Rs. 767cr, while Airtel business grew by 9.2% YoY to Rs. 3,702cr as demand for data continued to increase.

Margins improve, as access charges reduce

In Q4FY21, EBITDA grew 28.2% YoY to Rs. 12,332cr, as EBITDA margin expanded by 610bps YoY to 47.9% (+240bps QoQ) largely driven by significant reduction in access charges (due to IUC impact), partially offset by marginal increase in spectrum and network operations expenses. Indian wireless business margins remain robust contributing to overall margins. Net profit reported at Rs. 759cr in Q4FY21 vs. Rs. 5,237cr loss in Q4FY20.

Key concall highlights

* Airtel tested LIVE 5G service in Hyderabad over its 1800 MHz band, demonstrating 5G readiness using dynamic spectrum sharing.

* Capex spends to remain at current levels with focus ahead on deleveraging its balance sheet reducing debt.

* Growth in customer base continued to be healthy as India and Africa businesses reported 13.1% and 6.9% growth, respectively. Management expects ARPU to bottom out at these levels and could improve in the coming quarters.

* Company acquired 20% stake (increasing its stake to 100%) in Bharti Telemedia Ltd. from Warbung Pincus for Rs. 3,126cr.

Valuation

Strong momentum in revenue backed by continued growth in customer additions and improved margins supportthe growth prospects for the company. We expect the ARPU to improve further on expected hike in tariffs. Airtel’s strong brand presence coupled with its executional capabilities will help drive the topline growth and healthy margins. Maintaining a positive long-term outlook, we reiterate our BUY rating on the stock with a revised target price of Rs. 676 based on SOTP valuation.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at www.geojit.com
SEBI Registration number is INH200000345

Above views are of the author and not of the website kindly read disclaimer