Earnings Outlook
Tariff hikes to support Bharti Airtel's growth in Jul-Sept
This story was originally published at 16:12 IST on 24 October 2024
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By Apoorva Choubey
MUMBAI – Bharti Airtel Ltd. is expected to register an all-round improvement in earnings for the September quarter, with tariff hikes and 4G subscriber additions likely to give a leg-up to the net profit, operating margin and revenues. The company is also seen bettering its industry-leading average revenue per user per month, a key metric used to gauge the health of companies in the telecom sector.
The company's consolidated net profit is seen rising 12.6% on quarter to INR 46.8 billion for Jul-Sept, according to the average of estimates from seven brokerage houses. The lowest projection for the bottom line was brokerage Prabhudas Lilladher's INR 38.8 billion, while the highest was 52.2 billion, by Nuvama Wealth Management. The possible reason for the wide range of estimates could be the difference in assumptions of the subscriber mix, particularly of 4G customers, which has led to varied estimates for the ARPU too.
Bharti Airtel's consolidated net sales are seen 7% higher sequentially at INR 411.8 billion for the September quarter. The estimates for the top-line ranged from INR 407.5 billion to INR 415.4 billion.
The New Delhi-based company's earnings growth for the quarter will be underpinned by an increase in average revenue per user, as a result of tariff hikes taken from July. Bharti Airtel had raised mobile tariffs across plans by 11-21%, following market leader Reliance Jio Infocomm Ltd's tariff increase of 12-27%.
The average revenue per user of Bharti Airtel is seen 8-10% higher than a quarter ago at INR 225-233 for Jul-Sept. The company's ARPU returned to a decade-high of over INR 200 rupees last year, and has remained near INR 210 for the last three quarters.
Earlier this month, Reliance Jio reported a 7% rise in average revenue per user at INR 195.1 for Jul-Sept, after the metric was unchanged at INR 181.7 for four quarters in a row. This increase in ARPU drove Reliance Jio's net profit 14% higher on quarter to INR 62.31 billion, while revenue for Jul-Sept rose 7% to INR 283.38 billion.
Bharti Airtel is not just seen outperforming Reliance Jio's ARPU growth, but some expect it to outdo the rival in terms of subscriber additions as well. Some analysts expect Bharti Airtel to add a marginal number of subscribers at a time when Reliance Jio has seen a fall in its customer base this quarter.
For the September quarter, brokerage Kotak Institutional Equities estimates Bharti Airtel's wireless customer base to have increased by 2.5 million. It expects addition of 7 million clients to the 4G customer base, compared to 6.7 million additions a quarter ago. The addition of 4G customers and conversion from 2G will aid in expansion of the company's profitability during the quarter. Bharti Airtel's operating margin may improve 150-307 basis points on quarter from 51.2% in Apr-Jun, according to analysts.
Apart from a superior subscriber mix, tariff hikes and healthy broadband business growth will also underpin the improvement in operational performance, said analysts. Earnings before interest, tax, depreciation and amortisation are expected to rise 10% on quarter at INR 219.4 billion, the average of estimates from five brokerages showed.
Bharti Airtel's Indian operations are expected to witness 8.8% sequential growth in revenue for Jul-Sept and a 2.1% increase is likely in sales from the Africa business in rupee terms, Nuvama said. Some analysts expect the revenue from the Africa unit to be flat or rise 1%. Among other business segments, mid single-digit growth is expected in revenue for the home broadband business and low single digit growth in the enterprise segment.
Investors will look out for the management's comments on the status of 5G adoption in the country, subscriber additions, traction in home broadband and enterprise business and pending spectrum dues to the government. Bharti Airtel is set to detail Jul-Sept earnings on Monday.
On a year-on-year basis, the net profit is seen jumping a massive 249% while net sales may rise 11%. At 1450 IST, shares of Bharti Airtel were flat at 1,679.50 rupees on the National Stock Exchange.
Following are the Jul-Sept earnings estimates for Bharti Airtel from seven brokerage houses:
| Brokerage | Net sales (INR million) | Net profit (INR million) |
EBITDA (INR million) |
| Antique Stock Broking Ltd | 407,496.00 | 45,965.00 | 217,650.00 |
| Axis Securities Ltd | 410,090.00 | 51,380.00 | |
| Kotak Institutional Equities | 413,339.00 | 47,431.00 | 224,259.00 |
| Motilal Oswal Financial Services Ltd | 410,433.00 | 44,600.00 | 216,449.00 |
| Nuvama Wealth Management Ltd | 415,411.00 | 52,171.00 | 221,467.00 |
| Prabhudas Lilladher Pvt Ltd | 411,977.00 | 38,785.00 | 217,112.00 |
| Sharekhan Ltd | 413,750.00 | 47,560.00 | |
| Average | 411,785.14 | 46,841.71 | 219,387.40 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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