Bharti Airtel Q1 Review: Higher Free Cash Flow, 2.1% ARPU Spike Offset Tepid Financials; Brokerages Bullish
The company's Ebitda was up 3% to Rs 27,838.1 crore versus Rs 27,008.6 crore
Bharti Airtel's first quarter results were a mixed bag with Airtel's business performance slipping sequentially, but the company's outperformance on the capex front led to bullish commentary from brokerages across the board.
The average revenue per user, a key metric to track the health of telcos, went up 2.1% from Rs 245 to Rs 250.
Bharti Airtel Q1FY26 Highlights
Revenue up 3.3% to Rs 49,462 crore versus Rs 47,876 crore (Estimate: Rs 49,761.8 crore).
Net profit down 52% to Rs 5,947.9 crore versus Rs 12,475.8 crore (Estimate: Rs 5,660.4 crore).
Ebitda up 3% to Rs 27,838.1 crore versus Rs 27,008.6 crore (Estimate: Rs 27,980 crore).
Margin at 56.3% versus 56.4% (Estimate: 56.23%).
Macquarie On Bharti Airtel
Airtel recorded a capex decline in June as opposed to an increase in the March quarter, driving up the company's free cash flow. FCF is an important metric for business, as an increase suggests operational efficiency and healthy financials. Macquarie noted Airtel's India mobile business generated a record US$1.6 billion of free cash flow in the quarter.
The brokerage said India's mobile business capex was "down meaningfully in the June quarter."
"Bharti continues to see operating leverage, with segment Ebitda margin expanding to 59.4%," Macquarie further added.
Another important metric to track the health of telcom companies— average revenue per user—was also up by Rs 5 at Rs 245 per user. Macquarie termed it a "material improvement" for the company.
On tepid company financials, the brokerage said, "Enterprise revenues declined 3% year-on-year, albeit offset by better-than-expected Ebitda margin." However, it noted that digital TV revenue was steady, though with lower margins year-on-year.
The brokerage also highlighted the impact of increased FCF, noting the company's net debt moderated to US$22.4 billion.
Citi On Airtel
Citi was bullish on both the operational metrics front and the company's financials, noting that "Bharti delivered a steady first quarter, with profit and loss metrics largely in line with expectations."
The brokerage noted that the homes segment delivered strong sequential growth of 8%, led by robust subscriber additions, though performance in teh Airtel business segment lagged.
Citi also highlighted that lower capex drove robust FCF generation and further deleveraging.
Earlier, Bharti Airtel Africa reported stronger numbers compared to its India business numbers. Citi noted that, "Airtel Africa had previously reported a solid 10. Consolidated revenue came at Rs 49,500 crore and Ebitda came at 28,200 crore, a 3% spike in both the numbers, quarter-on-quarter, and also noted that the numbers were 1% ahead of estimates.
On FCF, the brokerage was bullish largely due to a 6% decline on net debt led by increased free cash flow.
Morgan Stanley On Airtel
Morgan Stanley noted that at the consolidated level, Bharti Airtel delivered a slight beat versus its revenue and Ebitda.
The brokerage also noted that India business delivered an Ebitda beat, led by better-than-expected performance in the Airtel business.
Like Citi and Macquarie, Morgan Stanley also noted the increase in FCF and decrease in capex stating that, "Lower-than-expected capex of Rs 8,310 crore was down 42.3% quarter on quarter." India business capex came to Rs 54.5 billion, down 47.6% quarter on quarter, which was nearly 20% lower than Morgan Stanley's estimates.
However, the brokerage expressed mild caution due to minor subscriber misses in India Mobile services, Home broadband & Digital TV versus Morgan Stanley's estimate.
"Airtel saw a miss in revenue by 1.9% versus estimate, though at the Ebitda level, it beat Morgan Stanley's estimate by 3%", the brokerage noted
