Bharti Airtel (Airtel) is India’s second largest telecom operator with ~33.2 crore wireless customers in India and ~13.9 crore subscribers across 14 African countries. It enjoys industry leading ARPU in the wireless business in India
Airtel’s share price has been up ~104% in the past five years.
We value Airtel at a target price of ₹ 920
Besides Airtel, we like Sterlite Tech in our telecom coverage.
(Year-end March) | FY20 | FY21 | FY22 | 5 yr CAGR (FY17-22) | FY23E | FY24E | FY25E | 3 yr CAGR (FY22-25E) |
---|---|---|---|---|---|---|---|---|
Net Sales (| crore) | 87,539.0 | 100,616.0 | 116,830.3 | 4.1 | 139,894.9 | 153,208.6 | 165,676.1 | 12.3 |
EBITDA (| crore) | 36,482.0 | 45,372.0 | 57,817.3 | 10.4 | 71,763.1 | 80,195.5 | 89,057.0 | 15.5 |
Net Profit (| crore) | -32,183.0 | -15,084.0 | 4,538.3 | 3.6 | 8,233.8 | 16,695.2 | 23,071.3 | 71.9 |
Adjusted PAT (| crore) | -4,075.0 | -1,300.0 | 2,839.7 | - | 8,903.6 | 16,695.2 | 23,071.3 | - |
EPS (|) | -59.0 | -27.6 | 8.1 | - | 14.5 | 29.4 | 40.7 | - |
Price / Book (x) | 5.5 | 7.2 | 6.5 | - | 5.5 | 4.5 | 3.7 | - |
EV/EBITDA (x) | 15.1 | 12.8 | 10.2 | - | 8.4 | 7.3 | 6.1 | - |
RoCE (%) | 4.1 | 6.4 | 9.1 | - | 12.3 | 14.9 | 17.0 | - |
RoE (%) | -5.3 | -2.2 | 4.3 | - | 11.1 | 17.2 | 19.2 | - |
ARPU at | 193.4, up 1.9% QoQ, was driven by data monetisation, premiumisation and bundling through Airtel Black. We highlight the overall ARPU improvement was better than Jio, which saw ~0.6% QoQ growth in ARPU. Overall sub base saw a modest addition of 0.5 mn QoQ at 327. 8 mn. The key highlight of Q3 was healthy 4G subscribers net addition of ~6.4 mn, along with robust addition of ~653,000 postpaid subscribers (vs. ~283,000 in Q2). The company indicated that given the unsustainable RoCEs of sub 9% in India and South Asia business, a tariff hike is warranted. We highlight that while the management does expect a further round of tariff increase for prepaid customers in the near term, it refrained from stating the timeline. We expect monthly ARPU to reach | 213 in FY25 vs. current levels of | 193, driven by mix improvement as we do not build further step-up tariff in our estimates.
In the broadband business, Airtel witnessed strong growth driven by healthy net customer additions of 432,000 during the quarter to 5.6 mn. The collaboration with local digital cable operator on partnership model has enabled Airtel to be present in 1140 cities (added 80 cities during Q3FY23). We note that the company had also reiterated robust opportunity on Enterprise side (total market size of ~| 40,000 crore) and adjacent areas like CPaaS, Data Centre, Cloud communication, cyber security, IOT with similar market size. During the quarter, the company saw superior growth compared to peers and added to the market share gains in the enterprise segment. The company indicated that 50 out of top 500 customers have grown 300% YoY in Airtel business segment.
Bharti Airtel continues to report resilient numbers especially on the Indian wireless business front. The improvement in ARPUs, premium customer addition and continued margin expansion remain a key positive. The non-wireless business momentum along with Africa performance, continues to be robust. Favourable industry structure of three players (two being strong), government relief and fund raise puts Airtel in sweet spot to maintain its relative strength among peers with a formidable digital ecosystem offering. We remain constructive on Airtel and maintain our BUY rating on the stock with an SOTP based target price of | 920/share
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