Buy Bharti Airtel Ltd For Target Rs.2,275 by Prabhudas Liladhar Capital Ltd
India Mobile ARPU momentum remains intact
BHARTI reported consol. Revenue and EBITDA of INR585.4bn and INR333.0bn (PLe: INR562.4bn; BBGe: INR569.0bn), up 5.7% QoQ / 18.4% YoY, driven by strong growth across India and Africa operations. In India Mobile, ARPU of INR264 exceeded our estimate (PLe: INR261), although subscriber additions of 3.3mn were below our expectation (PLe: 4.5mn). Performance across the Home and Enterprise businesses remained steady, with EBITDA growing 2.2% and 5.7% QoQ, respectively. Digital business remained subdued, with EBITDA flat QoQ and down 15.5% YoY. Africa continued to deliver resilient performance. Management remains focused on driving ARPU growth. Homes witnessed moderation in subs additions, with ARPU remaining flat QoQ. BHARTI aims to revive Homes subs growth by improving customer quality. Management reiterated its optimism on Africa's long-term growth opportunity. Maintain BUY with a revised TP of INR2,275 (earlier INR2,226), based on an implied 12.2x FY28E EV/EBITDA for the India business, while additionally incorporating the value of investments in Airtel Africa, Indus Towers and Bharti Hexacom.
India Mobile business remained strong:
Revenue grew 3.8% QoQ and 9.2% YoY to INR299.3bn, while EBITDA increased 4.1% QoQ and 11.8% YoY to INR181.2bn, driven by 2.6% QoQ / 5.6% YoY ARPU growth and subscriber additions of 3.3mn. ARPU remained resilient at INR264 in Q1FY27 despite the absence of tariff hikes, supported by customer premiumization and the rollout of 5G network slicing (Fastlane). Management expects ARPU growth to be driven by premiumization, postpaid additions, smartphone upgrades, higher data usage, 5G adoption and international roaming. Factoring in these trends, we estimate BHARTI's subscriber base at 386mn/394mn and ARPU at INR272/290 for FY27E/FY28E, respectively.
Home ARPU declined YoY:
Revenue grew 33.2%/4.4% YoY/QoQ to INR22.9bn with EBITDA of Rs11.2bn (+30.9%/+2.2%, YoY/QoQ). Subs addition stood at 0.5mn, down from 1.1mn in Q4FY26. ARPU declined -2.6% YoY at INR523. The moderation in home broadband additions and decline ARPU were largely due to low entry-level pricing that had led to higher churn and weaker customer retention.
Digital Business remains a drag:
Revenue grew 1.4% YoY and 3.6% QoQ to INR7.7bn. EBITDA performance weakened further, declining 14.5% YoY but remained flat QoQ at INR3.3bn. Subscriber additions came down to ~6200 in Q1FY27 vs 570,000 in Q4FY26. However, ARPU remained largely stagnant QoQ and YoY at INR160
Enterprise business revenue improves QoQ:
Revenue continue 3.2%/12.0% QoQ/YoY in Q1FY27 to INR56.6bn. EBITDA improved 5.7%/15.7% YoY/QoQ to Rs24.6bn, with an EBITDA margin of 41.0% vs 42.9% in Q4FY26 and 42.6% in Q1FY26.
Africa remains resilient:
Revenues grew 9.6% QoQ and 45.4% YoY to Rs175.6bn, while EBITDA stood at Rs87.6bn (+64.1% YoY, +18.5% QoQ). Revenue (CC) went up 21% YoY in Q1FY27. Subscriber addition for Voice and Data stood at 5.5mn and 3.0mn vs 4.2mn and 2.4mn QoQ. Data ARPU increased at USD2.9 vs USD2.6 QoQ, while Voice ARPU remained flat at USD1.1 vs USD1.1 QoQ. The company remains constructive on the region's structural opportunity, citing favorable demographics, low telecom and broadband penetration.
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