Reduce Bharti Airtel Ltd for the Target Rs.1,900 by Emkay Global Financial Services Ltd
Bharti Airtel (Bharti)’s India Mobile business reported in-line results, as strong subscriber addition (4.7mn vs street’s expectation: 3.1mn) was offset by lowerthan-expected ARPU growth (Rs257, vs expectation of Rs259). Africa business continued to do well, with 40.9% and 50% YoY revenue and EBITDA growth, respectively. While Bharti continues to execute well, lack of tariff hikes and increase in smartphone prices will weigh on ARPU growth. We had earlier highlighted the street’s optimistic ARPU expectations (refer: Great operations, greater expectations). The street has started trimming FY28E ARPU estimate – Rs308 currently vs Rs318 in Aug-25. Bharti’s valuation, excluding Airtel Africa and Indus Towers, at 12.8x/11.6x FY27E/FY28E EV/EBITDA, is higher than global peers’ and its historical valuations. We maintain REDUCE and trim our SOTP-based TP by 5% to Rs1,900 from Rs2,000. Higher-than-expected ARPU increase and market-share gains from peers are key risks to our thesis.
India business:
Strong subscriber additions offset weak ARPU growth India Mobile business revenue grew 0.6% QoQ (street expectation: 0.9% QoQ), as higher subscriber growth was offset by weaker ARPU. ARPU decline was due to lower number of days in the quarter and lower international roaming revenue on account of the West-Asia conflict. Airtel Business and Homes Services continued to see strong growth: 2.6% and 9.5% QoQ, respectively. Capex for India business in FY26 stood markedly higher, at Rs396.5bn, with India Mobile segment accounting for Rs186bn. The company now does not see capex declining in FY27 as it accelerates investments for data centers, fiber backhaul, etc.
Constant currency growth in AAF translates to reported currency basis
Airtel Africa revenue growth was strong, at 6.8%/40.9% QoQ/YoY, on 1% QoQ ARPU growth and 4.2mn QoQ subscriber additions. Structural growth drivers of low teledensity (~45%), low smartphone penetration (~50%), and densely populated young population continue to propel growth of >20%. With a stable FX environment, the constant currency has finally translated to reported currency growth, driving the street’s EBITDA estimate upgrades. Bharti increased shareholding in AAF by 16.3pp to 79% through a share-swap deal, which we believe is neutral as the deal is happening close to current market price.
Outlook and valuations: Optimistic growth expectations; expensive valuations
We expect 7.1% ARPU CAGR over FY26-29E for Bharti (street: 9%) as the industry has already fully recovered from the disruption. At 8.9x FY28E EV/EBITDA, the implied multiple for the India business is 11.6x, which is at the top end of global telecom valuations. Given expensive valuations and the street’s optimistic growth expectations, we believe the risk-reward is unfavorable. We maintain REDUCE and trim our SOTP-based TP by 5% to Rs1,900, as we cut our target multiple for the India business to 12x from 13x earlier, factoring in the lower ARPU growth trajectory
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