Shares of Bharti Airtel could rise around 31%; Should you buy a telecom stock?

Last updated time: 09 March 2023, 12:24 IST

Airtel’s ARPU was 163 in the corresponding quarter last year (Q3 FY22).

CLSA maintains a Buy rating on Bharti Airtel with a target price of Rs 1,015, indicating an upside of over 31 percent

CLSA has maintained a buy rating on Bharti Airtel with a target price of Rs 1,015, indicating an upside of over 31 percent from the current market price. The telco is leading India’s mobile tariff hike.

The research firm believes the latest rate hike, which came 14 months before the general election, could boost average revenue per user (ARPU) by 3 per cent.

Bharti Airtel’s CEO also hinted that there may be further rate hikes by mid-2023. Additionally, postpaid subscriber growth is expected to further boost ARPU. Bharti Airtel is also set to roll out 5G across the country by March 2024, the research firm said.

CLSA has projected a consolidated/India mobile earnings before interest, taxes, depreciation and amortization (EBITDA) compound annual growth rate (CAGR) of 15/23 per cent for FY25.

The telecom major reported a sharp 92 percent year-on-year (y-o-y) jump in consolidated net profit to Rs 1,588 crore for the December quarter. Its income from operations rose 20 percent year-on-year to Rs 35,804 crore.

However, net profit came in below the average estimate of Rs 2,673 crore, but revenue came in above estimates of Rs 35,299 crore. It rose 3.7 percent year-over-year, and the bottom fell sharply by 47 percent.

Total expenses in the third quarter rose to Rs 17,351 crore from Rs 15,164 crore a year ago and Rs 16,933 crore a quarter ago. Spectrum usage charges rose 4 percent year-on-year to Rs 2,842 crore in the quarter, but gradually declined 4 percent.

Consolidated operating profit, calculated as earnings before interest, tax, depreciation and amortization (EBITDA), reached Rs 18,601 crore; operating margin improved 205 basis points to 52 percent year-over-year.

The India business posted EBITDA of Rs 13,167 crore, while margins grew by 299 bps to 52.7 percent. The India business reported a quarterly revenue of Rs 24,962 crore, up 19.4 percent over the same period last year. Mobile services revenue in India grew by 21 percent year-on-year, driven by continued 4G customer adoption and increased ARPU.

At 10:00 AM, Bharti Airtel was trading at Rs 771.50, up Rs 5.05, or 0.66 percent, on the BSE. It touched an intraday high of Rs 795.50 and an intraday low of Rs 770.40.

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