Bharti airtel ventura_090213

Quarterly Result Update

Bharti Airtel Ltd Continued disappointing performance

Friday, 8th February, 2013

Outlook

Despite industry witnessing tariff hikes during the quarter, traffic growth is likely to be subdued going ahead as growth is expected to be primarily driven from rural area which has a lower spending capacity. While the company’s recent revenue market share gains in domestic business is encouraging, subdued growth outlook in its non-wireless units in India and slower improving profitability in Africa remains the key overhang for the stock. At a CMP of Rs 321, the stock is currently trading at a consensus P/E of 23.4x and 16.7x for FY14E & FY15E and we believe all the negatives pertaining to regulatory woes have been factored in. We recommend a HOLD on the stock.

Key Takeaways

• Bharti Airtel reported a decline of 0.2% QoQ in revenues to Rs 20,240 crore in Q3FY13. The India/S.Asia revenues fell 1.1% to Rs14,270 crore. Excluding one offs in Q2FY13, consolidated and India / S.Asia revenues growth was at 2.8% and 3.1% respectively. While, Bharti Airtel's mobile revenues have increased 3.9% QoQ to Rs10,940 crore; up ~7.5% YoY. India traffic grew 2.8% QoQ to 241 bn minutes. Gross realized rate in India decreased by 0.2% QoQ to 42.5 paise. Mobile business EBITDA margin remained flat; seasonal tailwind offset by diesel price hike and cost related to stringent KYC norms.

• During Q3FY13, the company had an EBITDA of Rs 6183.9 crore, a growth of 4% compared to Q3FY12. The reported EBITDA margin for the quarter was 30.6%. The key trigger to drive this growth are the improved customer acquisition process has enabled a reduction in selling, general & administrative costs in India & South Asia by Rs 101.2 crore compared to Q2FY13

• Africa USD revenues grew 3.3% QoQ during Q3FY13. Net subscriber base grew to 61.7mn adding ~3m net subscribers during the quarter (5% QoQ and 21% YoY) highest in last 10 quarters. Minutes grew by ~11% QoQ to 26.2bn even as blended realizations dropped ~6.5%QoQ due to residual impact of price corrections and weaker African currencies. Africa EBITDA margins declined by ~70bp QoQ to 26.5% on account of a new market launch and weakness in Franco-African markets. Post the acquisition of Zain’s Africa business in 1QFY11, the management had targeted revenues and EBITDA of US$5bn and US$2bn respectively by FY13. However, the company has failed to achieve both the targets.

• Passive infrastructure was up by 3% QoQ and 8% YoY to Rs 2,640 crore (margins down 40bp QoQ) driven by increase in revenue/tenant/tower and sites rolled out in last six months. Segments EBITDA margin for Q3FY13 was 37%. The EBIT over the same period was Rs 420 crore as compared to Rs 375.8 crore YoY, a growth of 11.8%. Bharti Infratel holds 34,668 towers and average sharing factor of 1.82 times. During Q3FY13, Indus Towers had 111,240 towers and average sharing factor of 1.99 times.

Recommendation (Rs)

CMP 321 Rating HOLD

Index Details

Sensex 19,485

Nifty 5,904

Industry Telecom

Scrip Details

Mkt Cap (Rs cr) 1,21,938

Eq Shares O/s (Cr) 379.7

Avg Vol (Lakhs) 4.9

52 Week H/L 370/239

Dividend Yield (%) 0.3

Face Value (Rs) 5

Latest shareholding pattern (%)

Promoters 68.5 Indian Institutions 8.2 FII’s 17.3 Public 6.0

Total 100

Stock performance (%)

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Bharti Airtel -2.1 17.9 8.8 Nifty -0.8 3.1 11.3

Bharti Airtel Ltd


• Revenue for Telemedia segment at Rs 956.6 crore grew by 5% YoY led by 4.2% QoQ increase in ARPU (Rs

973 (US$ 17.9) per month) and customer base of 3.3 mn. EBITDA margin for the segment improved by 17.6% over the Q3FY13

Bharti Airtel Ltd


Description Q3FY13 Q3FY12 % Chg. Q3FY13 Q2FY13 % Chg. FY201203 FY201103 % Chg.Net Sales 20239.5 18476.7 9.5 20239.5 20273.2 -0.2 71450.8 59538.3 20.0Other operational Income 14.2 31.1 -54.3 14.2 9.8 44.9 55.0 63.5 -13.4Total Oper. Income(TOI) 20253.7 18507.8 9.4 20253.7 20283.0 -0.1 71505.8 59601.8 20.0Raw Materials Cons.- - - - - - - - - -% to TOI - - - - - - - - -Stock adj. (-)Inc / (+)Dec- - - - - - - - - -% to TOI - - - - - - - - -Net Raw Mat adj. for stock - - - - - - - - -% to TOI - - - - - - - - -

Other expenses 13048.7 11698.9 11.5 13048.7 12947.6 0.8 44277.6 36153.4 22.5% to TOI 64.4 63.2 - 64.4 63.8 - 61.9 60.7 -

Contribution Net_Sales 7205.0 6808.9 5.8 7205.0 7335.4 -1.8 27228.2 23448.4 16.1Personnel 1021.1 850.5 20.1 1021.1 984.6 3.7 3515.9 3278.4 7.2% to TOI 5.0 4.6 - 5.0 4.9 - 4.9 5.5 -

Total expenditure 14069.8 12549.4 12.1 14069.8 13932.2 1.0 47793.5 39431.8 21.2Operating Profit 6183.9 5958.4 3.8 6183.9 6350.8 -2.6 23712.3 20170.0 17.6% to TOI 30.5 32.2 - 30.5 31.3 - 33.2 33.8 -Non-Operating Income - 0.0 - - - - 0.0 0.0 0.0Interest 1331.9 787.7 69.1 1331.9 1021.9 30.3 3818.5 2181.3 75.1Exceptional Items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -98.2 100.0Gross Profit 4852.0 5170.7 -6.2 4852.0 5328.9 -8.9 19893.8 18086.9 10.0Depreciation 3900.5 3584.5 8.8 3900.5 3856.0 1.2 13368.1 10206.6 31.0PBT before Extra-ord 951.5 1586.2 -40.0 951.5 1472.9 -35.4 6525.7 7683.9 -15.1% to TOI 4.7 8.6 - 4.7 7.3 - 9.1 12.9 -

Extraordinary Items 0.0 0.0 0.0 0.0 0.0 - 0.0 0.0 0.0PBT 951.5 1586.2 -40.0 951.5 1472.9 -35.4 6525.7 7683.9 -15.1Tax Rate 70.2 35.2 99.2 70.2 52.4 34.0 34.6 23.2 49.6Prov. for Tax 667.5 558.5 19.5 667.5 771.4 -13.5 2260.2 1779.0 27.0% to TOI 3.3 3.0 - 3.3 3.8 - 3.2 3.0 -

Profit after Tax 284.0 1027.7 -72.4 284.0 701.5 -59.5 4265.5 5904.9 -27.8% to TOI 1.4 5.6 - 1.4 3.5 - 6.0 9.9 -

Minority Interest -0.3 -10.8 -97.2 -0.3 19.7 - 1.3 147.5 -99.1PAT (adj. For MI) 283.7 1011.3 -71.9 283.7 721.2 -60.7 4259.4 6046.7 -29.6Face Value 5.0 5.0 - 5.0 5.0 - 5.0 5.0 -Equity Share capital 1898.8 1898.8 - 1898.8 1898.8 - 1898.8 1898.8 -EPS (Rs.) 0.7 2.7 -72.4 0.7 1.8 -61.1 11.2 15.5 -27.8CEPS (Rs.) 11.0 12.1 -9.3 11.0 12.0 -8.3 46.4 42.4 9.4

Bharti Airtel Ltd


P/E Bands

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NIFTY Comparison

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Ratings Chart

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Operational Matrix (India and South Asia) Operational Matrix (Africa)

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Bharti Airtel Ltd


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