Bharti Airtel shares in focus after reporting 37% fall in Q2 profit. Should you buy or sell?
Bharti Airtel reported healthy subscriber additions and a 1.5% quarter-on-quarter rise in ARPU, brokerages maintained a buy rating on the stock saying that moderating capex will support deleveraging of $7 billion over FY25-26 which should add to stock returns.
«Bharti's encouraging performance continued in 2Q with higher postpaid/4G subscriber additions, higher margin in India, higher growth in Africa and strong FCF generation being the key highlights. We maintain our rev/Ebitda estimates and expect Bharti to deliver 16/17% India revenue/EBITDA CAGR over FY24-26,» Jefferies said.
The stock was trading 0.5% down on BSE on Wednesday at Rs 910 after the company reported a 37% year-on-year fall in its net profit to Rs 1,341 crore.
While Jefferies has a target price of Rs 1,085 on the stock, CLSA sees it at Rs 1,110.
For Jefferies, Airtel beat estimates with a 7% YoY rise in revenue and 11% jump in EBITDA but profit missed estimates due to higher-than-expected tax rate and minority interest.
«Bharti's capitalized capex in India mobile fell QoQ to Rs57bn, and this moderation should allay concerns over excessive capex spends by Bharti given its ongoing 5G rollouts. Bharti's consolidated FCF, adjusted for Rs80bn advance payment towards spectrum, stood at Rs57bn despite Rs97bn of cash capex in 2Q.
FCF generation will pick up as capex moderates further,» Jefferies said.
CLSA has maintained a buy rating on Airtel post Q2 results but raised the target price marginally to Rs 1110 from Rs 1100.
«The telecom major is leading India's mobile growth. It is also leading ARPU — its highest-ever postpaid subscriber gains.
