Bharti Airtel Q1 preview: Industry-leading show expected to continue

In the quarter ending March 2023, the India’s second-largest telecom company clocked a 50 percent jump in consolidated net profit at Rs 3,006 crore.

Bharti Airtel may continue reporting industry-leading growth numbers for the quarter ended June after greater adoption of post-paid and 4G services and steady customer acquisition. Businesses beyond telecom may report a mixed performance, analysts said.

In the absence of major tariff hikes in the current calendar year, the stock has delivered on-par performance, rising about 9 percent.

“We expect Airtel to report an industry-leading revenue growth of 11 percent YoY in Q1FY24, driving India mobile EBITDA growth of 17 percent,” said Kunal Vora, an analyst with BNP Paribas. “On a QoQ basis, we expect an acceleration in India mobile revenue growth to 3 percent, helped by an extra day during the quarter, an improving mix with higher 4G and post-paid subscribers and a slight impact of the increase in the price of the minimum recharge plan.”

India’s second-largest telecom company clocked a 50 percent jump in consolidated net profit to Rs 3,006 crore in the quarter ended March 2023. Sequentially, it was a surge of 89 percent. Revenue rose 14 percent to Rs 36,009 crore from Rs 31,500 crore a year ago and marginally sequentially.

Nigeria currency

Sanjesh Jain, an analyst with ICICI Securities, said his estimates suggest a “good quarter” for Bharti Airtel, aided by strong average revenue per user (ARPU) growth of 2.9 percent QoQ to Rs 199 and continued strong performance for the non-mobile segment. On a consolidated basis, Airtel Africa’s performance may be hindered by Nigerian currency devaluation, while underlying growth is likely to be healthy, he added.

Jain pegs Bharti’s consolidated EBITDA to rise 1.8 percent QoQ and 15.2 percent YoY to Rs 19,000 crore and consolidated revenue up 1.2 percent QoQ to Rs 36,400 crore.

India revenue is expected to rise 3.4 percent QoQ and 12 percent YoY to Rs 26,300 crore, led by the mobile segment. India EBITDA is likely to grow 4.6 percent QoQ and 18 percent YoY to Rs 14,000 crore, Jain said.

For Q1, brokerage house Prabhudas Lilladher has factored subscriber growth of 3 million to 338.4 million coupled with an ARPU increase of 1.4 percent QoQ to Rs 196. Home services revenue growth will be 4.2 percent QoQ and margin growth 60 bps QoQ, it said, adding that for DTH, it factored flat QoQ growth.

Accordingly, it expects Bharti’s consolidated revenue and EBITDA to increase to Rs 36,330 crore (up 0.9 percent QoQ) and Rs 18,860 crore (up 0.8 percent QoQ), respectively. The broker expects a 34 percent QoQ decrease in PAT to Rs 1,970 crore due to higher depreciation and amortisation and tax of 25.2 percent vs 15.7 percent in Q4FY23.

Africa and non-mobile

Vora said he expects YoY revenue growth for the home broadband business to be solid at 24 percent and for the enterprise business to also be in double-digits. DTH revenue should remain weak (flattish YoY).

“We expect capex to remain elevated in 1HFY24 as Airtel expands its rural 4G and urban 5G coverage. Airtel’s Africa business should be largely stable in 1QFY24 but the sharp depreciation of the Nigerian naira towards the end of Q1FY24 is likely to hurt sales and EBITDA in Q2FY24 but its impact on our valuation for Airtel is not meaningful as Airtel Africa (listed company) accounts for only 5 percent of our valuation,” Vora explained.

Since June, Nigeria has allowed its currency to fall. The naira depreciated from 471 per dollar to 870 per dollar earlier this week. This led companies in Nigeria to report exceptional non-operating losses. However, they welcomed the move for the medium to long term.

Last week, Airtel Africa posted 20 percent growth in constant currency revenue for the first quarter, with reported revenue rising almost 10 percent to $1,377 million. The net loss was $151 million.

At 1.36 pm, the share was quoting at Rs 879.35 on the National Stock Exchange, down 1.38 percent.