Should you invest in Bharti Airtel post Q2 results? Here’s what brokerages have to say

Majority of analysts on Dalal Street retained their bullish view on Bharti Airtel after it posted 300 per cent quarter-on-quarter (QoQ) growth in net profit for the quarter ended September 30. The bottom line of the telecom major jumped to Rs 1,134 crore from 283.50 crore in the preceding quarter ended June 30. It had reported a loss of Rs 763.20 crore in the same quarter last year.

However, the scrip traded 2 per cent lower at Rs 698 at around 3.15 pm (IST), while the benchmark BSE Sensex traded 269 points, or 0.45 per cent down at 59,760.

Commenting on the quarterly performance, AK Prabhakar, head of research, IDBI Capital Markets said, “Bharti Airtel results were better than expectations on all front. We are bullish on the company considering its attractive valuations. Any small hike in prices will benefit the telecom firm in a big way. We expect Rs 10-15 rise in average revenue per user (ARPU) by December.”

On the other hand, CLSA raised the target price of Bharti Airtel to Rs 860 (Rs 810 earlier) post Q2 results. It added that the company reported better-than-expected financial results in terms of revenue and EBITDA margins. “Led by Bharti’s 4G penetration, at 60 per cent of its own India mobile subscribers, we forecast a 15 per cent consolidated EBITDA CAGR by FY24,” the overseas financial services firm said.

Revenue from operations increased by 5.48 per cent QoQ and 13.03 per cent YoY to Rs 28,326.40 crore. ARPU figures improved to Rs 153 against Rs 143 in Q1 FY22. Its customer base stood at about 48 crore across 16 countries. Consolidated EBITDA jumpeded to 24.50 per cent YoY to Rs 14,018 crore.

Jefferies also upped the target price to Rs 860 (from Rs 834 earlier). “Bharti Airtel’s Q2 revenue and EBITDA came in line with expectations while profit beat estimates. Improvement in subscriber mix is a reflection of its network investments,” Jefferies said.

HDFC Securities sees Bharti Airtel at Rs 810 by next Diwali. It said that the company has completed Rs 21,000 crore ($2.87 billion) rights shares issue to existing shareholders. The fundraising is aimed at helping the company to boost its balance sheet to invest in 5G technologies and expand its existing telecom network to compete with market leader Reliance Jio. “It will also help the company repay adjusted gross revenue related liabilities among other dues. It is expected to roll-out 5G by the second half of FY23,” HDFC Securities said.

Among the key negatives in the Q2 results, Motilal Oswal Financial Services added that capital expenditure continued to increase to Rs 7,000 crore. “Nevertheless, free cash flow (FCF) post interest grew to Rs 2,200 crore, although this is much lower than the company potential. Along with Rs 10,500 crore increase in deferred spectrum liability, this has increased net debt by Rs 4,830 crore to Rs 1,31,300 crore. In the last year, despite 25 per cent EBITDA growth, FCF generation and deleveraging have been disappointing. These are expected to improve going forward,” the brokerage added.

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