Bharti Airtel: Brokerages maintain positive outlook after Q4 results; reaffirm 'buy' rating

Domestic brokerage firms maintained their positive outlook on Bharti Airtel, one of India’s leading telecommunications services providers. This optimism stems from the company's healthy performance in the March quarter.

In the fourth quarter of FY23, the company reported growth in mobile revenues despite no tariff hike during the period. Mobile revenue saw a YoY increase of 11% to reach ₹19,500 crore.

Additionally, the average revenue per user (ARPU) also showed growth, rising by 8.4% YoY to ₹193. This growth can be attributed to the addition of higher numbers of 4G and postpaid subscribers, said the domestic brokerage firm ICICI Securities.

According to the brokerage, the company has witnessed strong performance across all segments, including home services, the enterprise segment, payment's bank, and Africa business, except for the DTH segment.

The company benefited from the 2G to 4G transition and bigger postpaid subscriber base. It is consistently winning more market share and narrowing its gap vs RJio, the brokerage noted.

During the March quarter, the 4G customer base jumped to 22.41 crore from 20.84 crore in the same quarter of last year. In the preceding December quarter, the company added 6.2 million to its 4G customer base.

Mobile minutes witnessed a significant increase of 3.9% (QoQ) and 7.0% (YoY) in Q4, reaching a total of 1,124 billion minutes. This represents a substantial growth of 42 billion minutes compared to the previous quarter, according to ICICI Securities.

The average minutes of usage per subscriber also saw a positive trend, reaching 1,122 minutes per month, reflecting a 2.6% QoQ increase. ICICI Securities attributes this growth to the growing adoption of unlimited plans in the voice-only subscriber segment. The rise in unlimited plans has contributed to a higher penetration rate and usage of mobile minutes among subscribers.

The company witnessed a 6.0% QoQ and 25.2% YoY increase in revenue from its home services segment, reaching ₹1,100 crore. Overall, Bharti's India revenue grew by about 12.2% to ₹25,250 crore and by 19% in the 2022–23 fiscal to ₹82,487.7 crore.

The consolidated net profit of the company expanded 49.2% to ₹3,005.6 crore in Q4 FY23, ending FY23 with a total consolidated net profit of ₹8,346 crore, up 96.14% over FY22's net profit of ₹4,255 crore.

Moreover, the telecom major has been disciplined in capital allocation, which has resulted in strong FCF generation and a steady drop in leverage, which ICICI Securities believes will help create strong shareholder value in the next few years.

The brokerage continued with its 'buy' rating on the stock with an unchanged target price of ₹960 apiece. However, the brokerage laid out some of the key downside risks, which include a market share loss in India's mobile business and a rise in competitive and regulatory intensity.

On similar lines, Motilal Oswal also retains its 'buy' recommendation on the stock with a target price of ₹950 apiece. In the short term, Bharti's earnings are expected to soften due to moderating growth from 4G mix benefits, a low probability of tariff hikes, and softening market share gains, said the brokerage.

However, over the next two years, it is well poised to benefit from sectoral tailwinds coming from market share gains, improved ARPU, led by premiumization of customers, tariff hikes, and non-wireless segments, it added.

29 analysts polled by MintGenie on average have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.