Buy Bharti Airtel, target price Rs 610: ICICI Securities

ICICI Securities has given a buy rating to Bharti Airtel with a coverage price of Rs 610. Mobile revenues would benefit from a steep tariff hike of 20-40 per cent taken across prepaid plans with effect from December 4, 2019. However, such steep tariff increase will lead to SIM consolidation, and relative performance may vary. This quarter print will help in understanding the winner from the tariff hike, based on increment revenue market share, which will be the result of multiple factors such as strength on network, subs loyalty, brand etc. The brokerage expects Bharti Airtel to emerge winner from tariff hike, and is likely to report a better print.

ARPU for Bharti will see a strong increase of 11.6 per cent QoQ to Rs 150.

The share price moved up by 4.42 per cent from its previous close of Rs 423.95. The last traded price is Rs 443. 45. Incorporated in 1995, Bharti Airtel has a market cap of Rs 231288.35 crore.

Investment Rationale

Bharti Airtel’s consolidated EBITDA is likely to rise 10.9 per cent QoQ to Rs 103 billion. Bharti’s India revenue to grow 10.2 per cent QoQ (13.5 per cent YoY) to Rs 175 billion mostly led by mobile segment and EBITDA growth of 16.5 per cent QoQ to Rs 76 billion (EBITDA margin up 235 bps quarter on quarter (QoQ) to 43.4 per cent). Bharti’s Africa US$ revenue and EBITDA are likely to dip 1.5 per cent QoQ to US$870mn and down 2.4 per cent QoQ to US$385mn, on seasonality.

Consolidated revenue and EBITDA seen at +7 per cent QoQ to Rs 236 billion and 10.9 per cent QoQ to Rs 103 billion, respectively. It may likely report positive PBT, but a net loss of Rs 10 billion. The brokerage is factoring in forex loss of Rs 4 billion, and a higher capex for the quarter.

Financials

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 21947.10 crore, up 3.86 per cent from last quarter sales of Rs 21131.30 crore and up 6.96 per cent from last year same quarter sales of Rs 20519.20 crore. The company reported net profit after tax of Rs -312.60 crore in the latest quarter.