Bharti Airtel Ltd Q1FY23 results: First Cut

M Cap Rs. 391,846 crore | 52 W H/L: Rs. 782/573

(HDFC securities Retail Research)

Bharti Airtel numbers were above expectations in Q1FY23 and the company has strong business momentum led by leading operational indicators

Reported numbers
• Consolidated revenue grew by 22.2% YoY to Rs 32,804 crore vs expectation of Rs 32,280 crore in Q1FY23, driven by rapidly increasing demand for data, connectivity related solutions, tariff hike benefit and CPaaS (Communication Platform as a Service).
• EBITDA was up by 27.3% YoY to Rs 16,529 crore.
• EBITDA margin ramped up by 210bps YoY to 50.4% in Q1FY23.
• Net Profit stood at Rs 2,469 crore in Q1FY23, supported by healthy operating profit vs. expectation of Rs 1400 crore. Net profit was at Rs 941 crore in Q1FY22.
•PAT margin stood at 7.5% in Q1FY23 vs. 3.5% in Q1FY22.

Segment wise performance
• Mobile services from India revenues (contributed 53.5% of revenue) grew by 27.4% YoY on account of increase in 4G customer base and increase in ARPU.
• Mobile Service from Africa (contributed 28.5% of revenue) increased by 18.6% YoY, led by increase in ARPU and strong 4G customer additions.
• Mobile Service from South Asia (contributes 0.2% of revenue) decreased by 30% YoY in Q1FY23.
• Airtel Business (contributed 12.8% of revenue) increased by 4.4% YoY, on the back of robust demand for data portfolio and emerging businesses.• Home Services (contributed 2.7% of revenue) increased by 5.7% YoY, led by strong customer additions.
•While, Digital TV Services (contributed 2.2% of revenue) marginally declined by 1% YoY, Digital TV continued to hold its strong market position.

• As of June 30, 2022, the company’s overall customer base stands at ~497 million across 16 countries with India having ~362 mn customers and Africa stands at 131.6 mn.
•4G customers up by 20.8 Mn YoY & 4.5 Mn QoQ, 63% of overall customer base,
•Homes business showcased continued momentum, net additions of 1.4 Mn in Q1FY23 YoY.
•Mobile data consumption up by 16.6% YoY, consumption per mobile data customer at 19.5 GB per
Month in Q1FY23 vs. 18.8 GB per month in Q4FY22
•Digital TV customer base was at 17.4 Mn in Q1FY23 vs. 17.6 Mn in Q4FY22.
•Airtel Payments Bank continued to witness accelerated adoption leading to increase in monthly transacting users by 65% YoY.

Average revenue per user (ARPU) continued to be best in industry as Q1FY23, ARPU came in at Rs 183 vs. Rs 178 in Q4FY22, Rs 163 in Q3FY22, Rs 153 in Q2FY22 and Rs 146 in Q1FY22 on a comparable basis.

•Consolidated capex spend in the quarter was Rs 6,398 crore out of which capex in India stood at Rs 5,288 crore while Africa contributed the capex of Rs 1,088 crore in the quarter.

Key Development
•Airtel procured 19,867.8 MHz spectrum for Rs 43,040 crore in the recently concluded 5G spectrum.

Earnings and valuation
•Earnings per share was at Rs 2.8 in Q1FY23 and Rs 3.6 in Q4FY22. At a CMP of Rs 704, stock trades at 6x FY24E EV/EBITDA.

(HDFC securities Retail Research)