Bharti Airtel, ample evidence to suggest that the company is now operating in top gear. Where next for the share price?

Chirag Batavia • 9 March 2020

Bharti Airtel Ltd

 3QFY20 Consolidated performance - Overall revenues of Rs 219.5 bn (+4% qoq, +9% yoy)came in 0.7% ahead of KIE’s estimate. EBITDA stood at Rs92.7 bn, (+4.6% qoq), broadly in line with KIE’s estimate. PBT level loss stood at Rs6.05 bn, lower than 2Q’s Rs9.4 bn, and broadly in line with KIE’s estimated PBT loss of Rs6.35 bn.

 From an execution standpoint, there is ample evidence to suggest that the company is now operating in top gear. Consistent leadership positions in various third-party network tests, traffic (voice as well as data) growth prints and LTE net adds acceleration all bear ample testimony.

 Management said that they are hopeful of a constructive engagement with the judiciary and the government on the AGR case dues. (Page 3, Para 1). Bharti remains committed to a partnership approach for its content offerings. They have tied up with global leaders to provide best in- class content on Airtel Xtreme.

 Management said that the current tariffs are at still unsustainably low levels (even post the December 2019 tariff hike). They highlighted that tariffs have also come down for the class of consumers who can afford to pay a much higher price for good quality service.

 KIE’s revised FV stands at Rs600/share; it values the India wireless business at 9.5X FY22EEBITDA, Africa wireless and BHIN stakes at their respective CMPs and the DTH business at7X EV/EBITDA.

 Sharp run up in the past year or so notwithstanding, Bharti remains a solid multi-year compounding play as long as the company and R-Jio resist the alpha-male tendencies in the forthcoming spectrum auctions..

 KIE on 9th March 2020 recommends to BUY Bharti Airtel Ltd
    CMP: Rs.519
    Fair Value: Rs.600
    Potential Upside: 15.6%
    Market Cap: Rs.2833.34 bn
    Time Frame: 12 months

Note: The above is brief note on the company, based on the inputs of KIE research report dated 5th February, 2020 which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental. 

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