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Bharti Airtel stock tanks as new IUC regime hits Q4 results; brokerages say ‘buy’

Bharti Airtel’s share price fell as much as 2% on Tuesday morning.

Bharti Airtel’s share price fell as much as 2% today, being the only Sensex constituent in red, after the company reported a fall in fiscal fourth-quarter net profit and India mobile revenue. Bharti Airtel stock was down 1.8% to Rs 539 per share in the late morning trade. However, brokerage firms still remain bullish on the stock, seeing significant upside potential. Earlier Monday, Bharti Airtel reported that January-March net profit fell 11.12% on a quarter-on-quarter basis, even as the company swung from a net loss in the same quarter a year ago. Revenue from India mobile services business fell 4.5%, led by the new interconnect usage charges (IUC) regime.

Key figures from Bharti Airtel’s Q4 FY 2020-21 results:

*Average Revenue Per User (ARPU) has fallen during the quarter, but is still ahead of its peers.
*Jio’s ARPU stands at Rs 138.2 while that of Bharti Airtel is Rs 145.
*Bharti Airtel added 13.4 million subscribers in January-March.
*In comparison, Jio added 15.4 million during the quarter.
*Bharti also added 274k fixed broadband subscribers during the quarter, the highest ever quarterly addition.

Brokerages bullish; here’s what they say about Bharti Airtel stock:

Goldman Sachs

*Rating: ‘Buy’ (unchanged)
*Target price: Rs 665 (cut from Rs 670)
*EBITDA estimate cut by 2% through fiscal year 2023-24
*Expects short-term headwinds to earnings due to COVID-19 (moderation in subscriber additions) and competition (ARPU pressure);
*Forecast Bharti’s wireless business to deliver 20%+ revenue and EBITDA growth for the next two years;

Expects Bharti Airtel to gain market share: “We think the market is under-appreciating a ‘market share re-allocation’ scenario, and we continue to believe one of the two outcomes – tariffs moving up, or market share re-allocation, is highly likely in the near term… Bharti continues to outperform peers, with the company’s revenue market share higher by 110bps/390bps over the last one/five quarters.”

Expects ARPU to remain muted: “With new offers recently announced by Bharti and Jio, we expect ARPU for telcos to stay muted in the June quarter as well, with growth likely to resume from 2HCY21E in the event of a tariff hike.”

UBS

*Rating: ‘Buy’
*Target price: Rs 665
*Quarterly results are healthy
*Need to see how the second wave of Covid-19 impacts subscriber additions and ARPUs

Motilal Oswal

*Rating: ‘Buy’
*4G subscriber addition, superior network capacity, are positives for Bharti Airtel

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