Bharti Airtel Ltd

Bharti Airtel Ltd 

Fundamental :-

• Market Cap:  315,768 Cr.
• Current Price:  578.80
• 52 weeks High / Low  612.00 / 321.15
• Book Value:  141.41
• Stock P/E: 50.10
• Dividend Yield: 0.43 %
• ROCE: 3.46 %
• ROE: -0.53 %
• Sales Growth (3Yrs): -5.77 %
• Face Value:  5.00

• PEG Ratio:
• Promoter holding: 59.00 %
• Pledged percentage: 0.00 %
• Debt:  148,228 Cr.
• Price to Earning: 48.27
• EPS:  -62.81
• Net profit:  -32,183.20 Cr.
• Profit growth: 398 %
• Profit growth 7Years: %
• Net profit preceding 12months: -26,839.00 Cr.
• Profit growth 3Years: %
• Dividend yield: 0.45 %
• Debt to equity: 1.92
• Sales last year:  80,780 Cr.
• Sales growth: 8.37 %
• Unpledged promoter holding: 59.00 %
• Investments:  15,796 Cr.

Bharti Airtel is one of the leading global telecom companies with operation in 18 countries. The company is among top 3 mobile service providers in terms of subscriber base, with subscriber base of 283 million in India. Bharti Airtel has 5 strategic business units - Mobile services, home services, Airtel business, tower infrastructure and digital TV service. In India, it provides GSM services in 22 circles while home service provides broadband and wireline services. The company provides infrastructure facilities through Indus Tower Limited. Sunil Mittal is the Chairman of Airtel with promoter shareholding of 38.79%.
 

Investment rationale
 

Possibility of market share gains: With looming threat over going concern of Vodafone Idea, we believe Bharti Airtel is well placed to acquire its subscriber base. We believe Airtel would gain from Vodafone-Idea’s low –ARPU customers as switching to Reliance Jio would require new handset (4G enabled) which might not be feasible option. Besides, Bharti Airtel has positioned itself very well by paying of its AGR liability and relatively strong financial position to withstand the storm. However, it should be noted weakening of Vodafone would affect Airtel through i) Increase in network cost due to reduction in Vodafone Idea’s tenancies, ii) Incremental capex to accommodate traffic load on network.
 

Robust Q4FY20 performance with broad-based growth across segments: Bharti Airtel posted operationally strong set of numbers for Q4FY20 with a strong 14.3% QoQ growth in ARPU at Rs154 led by the robust addition of 12.5 million 4G subscribers during the quarter coupled with tariff hike. The consolidated revenue was up by 8.1% QoQ driven by 16% QoQ growth in its Indian wireless segment and a 3.5% QoQ growth in its Africa business. The consolidated EBITDA margin growth of 70bps QoQ was largely led by Indian wireless margin, up by 330bps QoQ driven by tariff hike.
 

COVID-19 turned out to be a mixed bag of events: COVID-19 turned out to be a mixed bag of event for Bhati Airtel as it witnessed significant surge in demand from home broadband and B2B business with growth in some segments such as collaboration services, video conferencing, etc. and resilient 4G customer base. However, there has been a slowdown in new device addition due to lockdown and the company witnessed significant pressure on low end subscriber.
 

Outlook and Valuation: We believe long term prospects of Bharti Airtel have improved due to bottoming out of ARPU and visibility of growth. The company expects for near term ARPU of Rs200 and medium to long term ARPU of Rs300 which would continue to drive ARPU growth ahead. Bharti has already cleared most of the dues and most of the negative is already behind for the company as ARPUs are already ticking up and it will only get better. The company has also successfully raised Rs21,502 cr of additional long term financing during the quarter. At current price, the stock is trading at 7.6x of its one year forward EV/EBITDA which looks attractive given its positive future outlook.

 

Duration of recommendation: Medium to long term.

Note :- Before investment you consult your financial advisor.