Strong performance in FY21; FY22-23e Ebitda cut by 1-3%; outlook for medium term bright; ‘Buy’ retained with TP of Rs 700
Bharti’s Q4FY21 performance was broadly in line with our expectations underpinned by sustained operating momentum across key business segments. We reduce our FY2022-23 Ebitda estimates by 1-3%, while factoring in lower ARPU and higher subscribers for India wireless business. We reiterate Buy with a revised SoTP-based FV of Rs 700 (Rs 710 earlier) seeing Bharti as a definite play on industry repair as well as consolidation; the visibility on either may improve in 12-18 months.
Sustained healthy growth in revenues and Ebitda across key segments
India wireless business ex-IUC revenues and Ebitda increased 4.2% q-o-q and 3.6% q-o-q led by a strong net subscriber addition of 13.4 mn, which was partly offset by a marginal q-o-q decline in realised ARPU to Rs 149/sub/month, partly due to a fewer number of days; voice and data volumes increased by 8-9% q-o-q. Africa business delivered a strong 17% y-o-y growth in revenues and highest-ever Ebitda margins at 47.7%. Enterprise business reported 6.1% sequential increase in Ebitda driven by 2.2% rise in revenues and robust expansion in margins to 40.2%.
Overall revenues increased 2% q-o-q and 17.6% y-o-y, on a like-for-like basis, to Rs 257.5 bn. Ebitda at Rs 123.3 bn (+2.3% q-o-q, +21% y-o-y), was 1.8% below our estimate due to a modest miss on ARPU, which was mitigated by curtailed operating costs. PBT at Rs 10.5 bn was 12% above our estimate led by a sequential decline in finance expense to Rs 37.8 bn, including interest on pending AGR dues and stable D&A cost. The company accounted exceptional gain of Rs 5.8 bn (post-tax). Reported net income was Rs 7.6 bn and recurring net income was at Rs 3.2 bn net of exceptional item and related minority adjustments.
Strong performance across segments in FY2021; modest increase in net debt
In FY2021, Bharti reported healthy 15% growth in overall revenues, reflecting—(i) robust 21% increase in India wireless revenues underpinned by robust subscriber addition of 37.7 mn and 13% rise in ARPU to Rs 153; (ii) 19% growth in Africa business; and (iii) 9% growth in enterprise business. Overall Ebitda increased 24% to Rs 453.7 bn amid a moderate 9% rise in operating costs. Adjusted net loss moderated to Rs 28.8 bn (EPS of -Rs 5.2/share) from Rs 36.4 bn in FY2020. Net debt including lease obligations increased to Rs 1.49 trn from Rs 1.25 trn at the end of FY2020. Capex was stable at Rs 241.7 bn.
Fine-tune estimates; retain BUY
We reduce consolidated Ebitda estimates for FY2022-23 by 1-3%, while factoring in (i) higher India wireless subscribers and lower ARPU; (ii) higher contribution from Africa; and (iii) other minor changes. We reiterate Buy with a revised SoTP-based FV of Rs 700, expecting robust growth in Ebitda in the medium term irrespective of sector dynamic.