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Dolat Capital Report
Bharti Airtel Ltd.'s Q1 FY23 revenue/Ebitda was 1/2% above estimates. Revenue/ Ebitda/profit before tax grew by a healthy 4/5.2/6.6% QoQ and 14/19/49% YoY.
We maintain our estimates. Our revised target price is Rs 865 at 10/6 times FY25E enterprise value/Ebitda for India/Africa (earlier Rs 845 at 10/5 times FY25E).
Average revenue per user growth driven by tariff increases, 2G-to-4G and 4G-to-5G upgrades, persistent weakening of Vodafone Idea Ltd. and listing process initiation for Jio are key triggers in medium term.
We thus see Bharti Airtel as a strong structural growth story for two-three years driven by ARPU uptick and accelerated growth in Home BB and enterprise services.
That said, Vodafone Idea's fall is likely to be gradual, long-haul of 5G pick-up and lack of tariff increases are near-term headwinds, despite medium term attractiveness.
We thus expect Bharti Airtel to go through a time correction in the near term. Bharti's 13% returns in trailing three months (outperformed Nifty) leads to downgrade from 'Accumulate' to 'Reduce'.
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