Bharti Airtel share price opened in the red on Wednesday morning but buying interest emerged soon, taking the stock more than 2% higher. The telecom major reported a net profit of Rs 830 crore in the October-December quarter, down 27% from the previous quarter. The drop in profit was owing to a one-time gain recorded in the previous quarter on account of spectrum sale to Reliance Jio. Bharti Airtel’s stock price has gained 4.2% so far this year, outperforming the benchmark Nifty 50, which is down more than 1% in 2022. Airtel shares were trading at Rs 723 per share on Wednesday.
ARPU improves, subscriber mix healthy
During the quarter in review, Bharti Airtel’s Average Revenue Per User (ARPU) increased to Rs 163 against Rs 146 a year ago. Global brokerage firm Nomura highlighted that Bharti Airtel ARPU increased 5.9% on-quarter basis while that of Reliance Jio and Vodafone Idea improved by 3.3% each. “Among the three private telcos, Bharti’s revenue and subscriber market share inched up by 65bp and 45bp q-q, respectively, on our estimates,” Nomura said.
On the subscriber front, Bharti Airtel’s net overall subscribers declined in the quarter. “This is in line with peers, but raises the concerns of 4G subscribers reaching maturity or high tariffs risking future growth,” said analysts at Motilal Oswal. “However, we expect to see a revival from the first quarter of the next financial year,” they added. Subscribers are believed to have been declined on account of tariff hikes. Nomura, however, focused on the subscriber mix, which they said has improved. “We note that, despite a 0.6mn decline in reported wireless subs, Bharti Airtel added 0.3 million net post-paid subs (+10% yoy) and 3 million net 4G data subs. ~61% of subs now using 4G data against ~54% on-year.
Africa Unit remains strong
Bharti Airtel’s Africa unit has continued its healthy growth trend in the October-December quarter. The EBITDA of the Africa unit grew 5% sequentially backed by all-round growth in Data and Airtel Money. “We see a potential rerating upside in both the India and Africa businesses on the back of steady earnings growth in each region from a tariff hike, ARPU mix improvement, and market share gains,” Motilal Oswal said. Africa segment revenue grew in double-digits and was 2% above estimates pinned by Nomura.
Ratings and target price
Analysts at Motilal Oswal have a target price of Rs 920 on Bharti Airtel shares. The target price set by the brokerage firm implies an upside potential of 27%. Meanwhile, analysts at Nomura have a ‘buy’ rating on the stock but a target price of Rs 855. “ In our view, Bharti’s rights issue, recent strategic tie-up with Google, cashflow relief from the moratorium on government dues, along with Rs 200 billion+ in annual free cash flow generation over FY21-25F, not only alleviate debt concerns but also ensure that Bharti would be well-placed to compete with Reliance Jio,” they said.
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