ICICI Direct is bullish on Bharti Airtel has recommended buy rating on the stock with a target price of Rs 380 in its research report dated February 04, 2019.
ICICI Direct's research report on Bharti Airtel
Consolidated revenues came in at Rs 20519 crore (vs. Rs 20543 crore), up 0.5% QOQ and largely driven by Africa revenues at Rs 5904 crore (4.5% QoQ growth, vs. 3.8% QoQ growth expectations) while India wireless revenue was at Rs 10189.4 crore, with ARPU of Rs 104 (exit ARPU of Rs 118). Marginal revenue miss was owing to weaker than expected Airtel non-wireless business. On India non-wireless front, homes services revenues were down 1.8% QoQ at Rs 550 crore (vs. flattish revenues expectations), Digital TV revenue witnessed muted growth of 0.9% QoQ (in line) while Airtel business witnessed a decline of 7% QoQ at Rs 3112 crore (vs. flattish revenue expectations) EBITDA came in at Rs 6,146 crore, a tad below our expectations of Rs 6277 crore, owing to higher access charges & marketing expenses. Consolidated EBITDA margins came in at 30% vs. our expectation of 30.6%, with India margins at 27.7% while India wireless margins slipped below 20% (at 19.9%) for the first time. Africa margins at 37%, were largely in line with our estimates Reported PAT came in at Rs 86.2 crore against our expectation of loss of Rs 475 crore aided by one-time gain of Rs 10,17 crore (net of tax), largely on account of deconsolidation of Airtel Payments Bank, which was partly offset by lower than anticipated tax credits.
We believe that a marked improvement in wireless ARPU is still a few quarters away amid Jio’s continued intent to capture subscriber market share and opportunity for market share grab during Vodafone-Idea integration. We reiterate that despite the near term challenges in non-wireless segment, Airtel remains well placed to survive the tough times with multiple avenues (Africa IPO, Tower stake sale, etc) to deleverage and provide cashflow support. We maintain our BUY rating with a DCF based target price of Rs 380.
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