Goldman Sachs has estimated a compounded annual growth rate of 15 percent for revenue and of 24 percent for EBITDA over FY21-24E for Bharti Airtel which is by far the highest in its global telco coverage. This growth is expected to be led by the company's wireless business, the foreign brokerage added.
Shares of telecom operator Bharti Airtel surged as much as 3 percent on Wednesday as the company's better-than-expected quarterly earnings boosted sentiment for the stock. However, it came off its initial high of Rs 732.50 and to trade at Rs 716.75, up 0.5 percent on the BSE.
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The company reported a net profit of Rs 1,134 crore for the quarter ended September as compared to a net loss of Rs 763 crore in the corresponding quarter last year. CNBC-TV18 Poll had pegged the net profit at Rs 710 crore.
The company's Average Revenue Per User (ARPU) for the quarter came in line with the estimate at Rs 153, as compared to Rs 143 in Q2 FY21.
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“During the quarter gone by, we sustained our operational excellence with a healthy 5.5 percent sequential growth in consolidated revenues and expansion of EBITDA margin to 49.5 percent,” said Bharti Airtel’s MD and CEO, India & South Asia, Gopal Vittal.
“Our strategy of focusing on quality customers has been validated by the strong price flow and ARPU increase that we have seen in our wireless business. The step-up in the performance of our enterprise and homes business reflects the resilience and strength of our overall portfolio. Even more exciting is the way our new businesses – Airtel Payments Bank, Data Centres and revenues from digital services are shaping up,” Vittal added.
Jefferies and CLSA have a 'buy' call on shares of the telecom operator.
Goldman Sachs has reinstated its 'buy' call on the stock and added that Bharti Airtel trades at 8.1 times FY23E EV/EBITDA, broadly in line with its historical trading average but higher than global telcos at 6-7 times which the brokerage believes is warranted given the telecom operator's superior growth profile.
The foreign brokerage has estimated a compounded annual growth rate of 15 percent for revenue and of 24 percent for EBITDA over FY21-24E for Bharti Airtel which is by far the highest in its global telco coverage. This growth is expected to be led by the company's wireless business, Goldman Sachs said.
Goldman Sachs believes the market is under-appreciating the inflection in Bharti Airtel's free cash flow and returns profile. It expects tariff hike to be the next catalyst for Bharti Airtel and estimated that every Rs 10 of incremental monthly ARPU implies $400 million in incremental annual EBITDA for the company.
Further, Bharti Airtel remains better-placed than Jio to win incremental market share from Vodafone Idea, Goldman Sachs added.
Meanwhile, Tarun Lakhotia, Director, Kotak Institutional Equities said, “The results have been fairly strong over the last several quarters and on the execution front, the company continues to do well. Incrementally, tariff hikes are the key catalysts that one is watching out for and given that the government’s policy measures are now announced and behind us and even the concern or apprehensions that one had around JioPhone Next launch which seems to be somewhat underwhelming versus expectations, the stage is set for the industry to start improving the tariffs and economics in the medium-term”.
That is the key trigger for any further rerating in the stock in the near term, he added.
"Bharti being the pure-play in India telecom remains our preferred pick. It remains our top pick to play the India telecom theme. Our fair value right now is Rs 800. We are expecting stronger growth in earnings over the next two-three years," said Lakhotia.