Bharti Airtel - Consolidated Q2 FY2014 Results - First Cut
Rajesh Desai
Dear Sir/Madam,
Bharti Airtel Ltd (Bharti) announced its consolidated Q2 FY2014 results on 30 October 2013. While the company’s revenues came in line with our as well as Bloomberg Consensus Estimates, its bottom line lagged the expectations. A glimpse of the same is as follows:
While Bharti’s top line increased 5.0% q-o-q to `21,324.4 Crores, its bottom line declined sequentially by 25.7% to `512.0 Crores in Q2 FY2014. The growth in revenues was mainly fueled by a strong 6.2% q-o-q increase in $ terms top line from African operations, which came as a positive surprise. In ` terms, the company’s African operations top line increased 18.5% sequentially to `7,025.8 Crores. Furthermore, Airtel Business, up 19.9% q-o-q, and Digital Services businesses, up 3.5% sequentially, continued to do well on top line level that supported Bharti’s revenues growth. On the flip side, a 2.1% q-o-q decline in the Mobile Services India revenues kept the sequential consolidated top line growth limited to 5.0%. On an overall basis, the company reported in line with expected revenues. However, its African revenues came above our expectations and remain the key driver for the aggregate top line coming slightly ahead of our estimates.
On the margins front, the company reported EBIDTA margins in line with our expectations whereas above par performance at top line level kept its absolute EBIDTA higher than our expectations. However, despite registering healthy EBIDTA, the company reported lower than expected net profits primarily due to `81.9 Crores of exceptional charge arising from a new regulatory levy at one of its international operations. As a result, despite foreign exchange losses, at `342 Crores, remaining below our estimates of `384.8 Crores, Bharti’s bottom line came below our estimates.
Operationally, Bharti reported a 1% sequential improvement in Average Revenues per Minute (ARPM) to 36.74p while its Average Revenues per User (ARPU) declined 4% q-o-q to `192, during the quarter. Furthermore, the company’s operating free cash flows increased to `4,693 Crores in Q2 FY2014 compared with `4,249.5 Crores, a quarter earlier. Bharti’s net debt also reduced to $9,697 Mn compared with $9,779 Mn in Q1 FY2014. Consistent improvement on operational parameters, expansion in margins, robust data services performance, and signs of growth picking up in Africa are likely to drive the company’s business growth in the upcoming quarters as well. With this, we continue to rate the stock a STRONG BUY with a target price of `417.20 per share.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai