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Robust operating performance led by India Wireless business

Result Synopsis

Bharti Airtel (BHARTI) reported broadly inline performance for the quarter. The sequential revenue growth was slightly below expectation; while EBITDA margin was as per estimates. It reported sequential revenue growth of (1.1%) QoQ, led by adverse impact from devaluation of Nigerian currency. India mobile subscriber base increased by 3.7mn QoQ to 342.3mn; while ARPU increased by 1.5% QoQ to Rs 203/month. Number of 4G Data Customer Base increased 3.4% QoQ to 237.5 mn. Postpaid subscriber addition was highest ever at 979k QoQ.

It continues to gain subscribers at broadly steady rate and has been gaining market share at the expense of VIL. It continues to maintain industry leading ARPU and that denotes its superior customer mix. We expect that 2G to 4G migration, prepaid to postpaid conversion, higher data usage, increasing international roaming penetration and tariff increase going ahead would continue to drive ARPU growth. Other businesses such as Airtel Business, African operations, Home Services are witnessing strong traction. We expect EBITDA Margin to improve in near term led by continued focus on operational efficiency. We estimate revenue CAGR of 11.8% over FY23?25E with average EBITDA margin of 52.2%. We maintain our ADD rating on the stock with target price of Rs 1050/share based on SOTP method. The stock trades at EV/EBITDA of 8.5x/7.0x on FY24E/FY25E.

Result Highlights

? Reported revenue of Rs 370.4bn (down 1.1% QoQ, up 7.3% YoY). ARPU from India Mobile Services during the quarter increased by Rs 3 QoQ (up 1.5% QoQ) to Rs 203. India wireless customers increased by 3.7mn QoQ to 342.3mn. Number of 4G Data Customer Base increased 3.4% QoQ to 237.5 Mn. Postpaid subscriber addition was highest ever at 979k QoQ. Mobile data consumption was up by 7.1% YoY (up 2.7% QoQ), at 21.7 GB per month

? Growth was led by Indian Mobile Service Business which grew by 2.7% QoQ, Revenue from Africa Mobile Service Business was down 9.2% QoQ, Revenue from Home Services segment was up 5.0% QoQ, Airtel B2B Business was up 1.1% QoQ, Digital TV service segment grew by 1.5% and South Asia business was down 0.1% QoQ.

? Consolidated EBITDA margin improved by 33 bps QoQ to 52.7%, led by positive operating leverage.

? Capex spends for the quarter stood at Rs. 92.1 billion vs Rs. 104.9 billion in Q1FY24. Net debt decreased to Rs 2.07 trillion vs Rs 2.08 trillion as of Q1FY24. Net Debt / EBITDA remained flat at 2.63 as of Q1FY24.

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