Bharti Airtel Ltd Stock Research Report

Strong Business Matrix; ARPU Gains Continue

Est. vs. Actual for Q2FY25: Revenue – BEAT; EBITDA Margin – BEAT; PAT – BEAT

Changes In Estimates post Q2FY25

FY25E/FY26E: Revenue: 1%/1%; EBITDA: 1%/1%; PAT: 2%/2%

Recommendation Rationale

• The company’s digital portfolio is gaining momentum along with market share gains

• The company maintained a strong share of 4G/5G net ads in the market, with the 4G customer base expanding by 4.2 Mn QoQ and 26.2 Mn YoY. This now constitutes 73% of the overall customer base.

• The company’s ARPU continues to be the best in the industry and average data usage per customer stands healthy at 23.9 GB/month.

• The management is confident of gaining longer-term demand momentum on the backdrop of the strong digital services portfolio, better rural conversion to 4G, and better cash flow management.

Sector Outlook: Positive

Company Outlook & Guidance: The company has a strong focus on quality customers with increasing ARPU and revenue. The management is confident of gaining industry-leading growth backed by robust rural penetration and a superior services portfolio. The Capex, however, will remain moderate in FY25.

Current Valuation: SOTP based

Current TP: 1,880/share (Earlier TP: Rs 1,660/share)

Recommendation: Given the company’s strong recovery potential backed by strong conversion, rising digital portfolio, and moderated Capex, we maintain our BUY recommendation on the stock.

Bharti Airtel Ltd Stock Research Report

Financial Performance:

In Q2FY25, Bharti Airtel Ltd. (Bharti) reported revenue of Rs 41,473 Cr, up 7.7% QoQ and 11.9% YoY (though slightly below our expectations). This was mainly on account of the devaluation of Nigeria’s Naira and other currencies during the period. The company posted a healthy operating profit of Rs 21,846 Cr, leveraging higher 4G conversions and a better service mix. Its operating margins, however, expanded by 292bps to 52.7% due to strong premiumization of accounts. Its net profit for Q2FY25 stood at Rs 4,153 Cr, registering a decline of 12% QoQ.

Outlook

From a long-term perspective, we believe Bharti Airtel would continue to gain market share, backed by the highest penetrations, and with minimum Capex requirements. With a stronger digital portfolio supported by rising per-user data, we are positive about the company’s future growth.

Valuation & Recommendation

We maintain our BUY rating on the stock given the company’s superior margins, stronger subscriber growth, and higher 4G conversions. We value the stock at Rs 1,880/share based on SOTP valuation and the TP indicates a robust upside of 15% from the CMP.

Key Financials (Consolidated)