Bharti Airtel’s Q4 results give hope, experts see stock gaining 10-25%

Bharti Airtel delivered encouraging results for the January-March quarter of the 2022-23 financial year (Q4FY23) as telecom and associated services moved into the 5G zone.

In India, Airtel’s mobile Q4 revenue and Ebitda (earnings before interest, tax, depreciation and amortisation) were Rs 19,550 crore (up 1 per cent quarter-on-quarter or QoQ) and Rs 10,530 crore (up 1.1 per cent QoQ), respectively.

The Ebitda margin was flat at 52.2 per cent.

ARPU or average revenue per user per month rose marginally to Rs 179.

Blended ARPU is near Rs 193 – which is also flat.

The company raised entry-level prepaid base tariffs to Rs 155 from Rs 99.

For Q4, net customer addition for 4G was an impressive 7.4 million and for FY23, net subscriber addition was at 9.4 million with average ARPU of Rs 192 (up 18 per cent YoY).

Bharti claims it is running 5G in over 3,500 towns – about half of total intended coverage.

Around one-third of post-paid customers (roughly 10 per cent of mobile users) have 5G enabled handsets and 5G handset penetration is expected to rise to 24 per cent, but the company doesn’t expect 5G uptake to be more than 15-20 per cent until 5G-driven services catch up with the platform.

Airtel’s Africa operations delivered flat Q4 revenue and Ebitda at $1.3 billion (down 0.7 per cent QoQ) and $659 million (down 0.7 per cent QoQ), respectively.

Total subscribers grew by 1.5 million, but ARPU was flat at $3.1, and Ebitda margins at 49.1 per cent.

For FY23, Ebitda and profit after tax (PAT) were at $5.2 billion (up 12 per cent year-on-year or YoY) and $2.6 billion (up 11 per cent YoY) with net subscriber additions of 11.6 million (10.2 million additions in FY22).

In Q4, the enterprise segment revenue was flat at Rs 4,790 crore, while the segment Ebitda grew by 3.3 per cent to Rs 1,970 crore.

The FY23 segment Ebitda increased to Rs 7,400 crore (up 18 per cent YoY).

The home services revenue was at Rs 1,100 crore (up 6 per cent QoQ) and Ebitda was at Rs 550 crore (up 6.8 per cent QoQ) with margins at 50.4 per cent (up 38bps QoQ).

Although home services ARPU decreased by 1.5 per cent to Rs 614 (from Q3’s Rs 624), dilution was offset by subscriber addition of 7.2 per cent QoQ to 6.1 million.

For FY23, segment Ebitda was at Rs 2,060 crore (up 28 per cent YoY).

The DTH segment’s Ebitda was down 1.2 per cent QoQ to Rs 410 crore, with lower ARPU at Rs 153.

The Q4 capex intensity was higher at Rs 11,400 crore (up from Rs 9,300 crore in Q3) and intensity was higher in Africa (Rs 2,400 crore, up 42 per cent YoY) and enterprise segment (Rs 1,550 crore, up 73 per cent YoY).

For FY23, overall capex was at Rs 34,100 crore vs Rs 25,700 crore in FY22.

Guidance is that capex intensity will be about the same in FY24 and taper in FY25.

The company targets top 150 towns and it is also focussed on 60,000 high-potential rural areas.

Airtel sees lots of opportunities in IOT, CPaaS (communications platform as a service) and cyber security.

Return on capital employed is low at 8.5 per cent, and the net debt:Ebitda is at 2.9x, consolidated.

The free cash flow for India was at Rs 4,300 crore for Q4 (around Rs 14,000 crore for FY23) and it is expected to rise sharply in FY24 to around Rs 21,500 cr.

However, most analysts have consensus ‘buy’ recommendations with 12-month price targets trending between Rs 875 and Rs 950 while some outliers suggesting Rs 1,000-plus.

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