As expected, Bharati posted a strong increase in the fourth quarter due to tariff hike. Its customer mix continues to improve, led by Network Investment. Homes and the enterprise segment are positively surprised, while DTH and Africa are disappointed. The FCF generation was strong and the leverage at 2.5x was comfortable. We have reduced our Ebitda estimate by 1-2% on higher diesel prices and hope that Bharati will provide 20% Ebitda CAGR in FY22-25.
We are redefining our ‘Buy’ rating with the revised price target
880. Strong 4Q results: Bharti Airtel's 4QFY22 revenues at31.5 billion (+ 22% YoY) estimate slightly lost due to Africa operation, but in Ebitda
16,000 crore (+29% YoY) was ahead of estimates. While PBT atRs 5,000 crore was ahead of the estimate, in profit
2,000 crore missed estimates due to higher-than-expected tax provisions and minority interest. Arpu-led growth: Bharti's India mobile revenues (+25% YoY) were in line with estimates, driven by a 23% YoY rise in Arpus to178. This has been due to the increase in tariffs as well as the improvement in the customer mix. Although the churning was higher due to the doubling of the voice charge, the higher gross adds positively surprisingly.
Bharati continues to see healthy additions between 4G (+5 m) and postpaid (0.2 m) users. Data traffic growth was strong at 5% QoQ, reflecting the acceptability of recent tariff increases. India’s mobile margin increased by 130 bps QoQ to 50.6% but missed the estimate somewhat. The sharp rise in diesel prices could have a further impact on India’s mobile margins. We have reduced our India Mobile Ebitda estimate by 3%. However, we still expect Bharati to pay 18% / 24% CAGR on India-Mobile Revenue / Ebitda on FY22-25.