YES Securities' research report on Bharti Airtel
The 2QFY23 consolidated operating profits at Rs 176bn (+27%YoY; +6.4% QoQ), stood in-line with our and street estimates. Strong YoY growth was led primarily by 24% YoY improvement in ARPU led by price increase undertaken in Nov’21, however QoQ improvement was led by improved data monetization and premiumization in subscriber base. While Ebitda and Ebitda margins continued to improve with uptrading but RoCE for India mobility business continues to be at ~8%, which is a rather inadequate return in perspective of required investment, thereby underlining the need for further ARPU rectification. Bharti is geared up for pan India 5G roll out by Mar’24, and most device ecosystem across manufacturers is almost ready to operate Bharti’s 5G network. While the 5G use cases appear limited in the near to medium term, but in the longer run there are strong prospects for multiple use cases across industries. Maintain BUY.
Outlook
We value BHARTI on SOTP basis at Rs 930/sh (Mar’24), as we roll estimates forward, implying a target EV/EBITDA multiple of 7.7x FY25e, vs 6.2x as implied by CMP. We estimate an operating earnings CAGR (FY22-25e) of 15%, backed by expectations of continual subscriber gain and ARPU improvement.
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