Bharti Airtel - Q3 FY2012 Results - First Cut - Microsec Research

Bharti Airtel Limited (Bharti) announced its Q3 FY2012 results on 08 February 2012. The company's top line came in line with our estimates while bottom line remained below expectations due to higher than expected Selling, General and Administrative expenses. Bharti reported SGA of `3,465.1 Crores compared with our estimates of `3,116.7 Crores, which led to a lower than expected performance on EBIDTA level. Accounting for the tax shield, the net impact of higher than estimated SGA was `235.1 Crores on the bottom line. Barring this impact, other numbers were largely in line with our estimates.

The company's top line increased 17.3% y-o-y to `18,476.7 Crores during the quarter while its bottom line declined 16.6% y-o-y to `1,011.3 Crores. As mentioned above higher than expected SGA remained the key reason for below expected performance on EBIDTA and Net Profit levels. Among the segments, Mobile Services (India & South Asia) grew 11.0% y-o-y to `10,176.4 Crores whereas Telemedia services revenues increased just 1% to `912.8 Crores. Apart from Telemedia Services all other segments, including above mentioned Mobile Services (India & South Asia), reported double digit revenues growth with Digital TV Services reporting robust 56% y-o-y jump in sales to 332.7 Crores during the quarter followed by Africa (y-o-y - 32.2% to `5,357.7 Crores in ` terms and 16% to $1,057 Mn in $ terms), Enterprises Services (13% y-o-y to `1,188.1 Crores), and Passive Infrastructure Services (11% y-o-y to `2,439.3 Crores).

Apart from 15% growth in subscribers the y-o-y increase in Indian Mobile revenues was fueled by 1% improvement in Average Revenues Per Minute (ARPM). On a sequential basis as well, Bharti's ARPM rose to `0.446 compared with `0.436 a quarter earlier. Consequently, the company's ARPU improved by `4 q-o-q to `187 during the quarter. Growth in Digital TV Services and Consolidated Africa top lines was also backed by respective 43% and 21% y-o-y increases in subscriber base. The performance of African operations remained notable with the region turning cash positive for the first time, in Q3 FY2012. This coupled with strong performance in India lifted the operating free cash flows to `6,279 Crores during 9M FY2012.

Going forward, we expect Bharti to report healthy revenues growth in the upcoming quarters as well. Performance of the company's African operations is on track and the region's positive operating free cash flows may provide it a cushion against exchange rates while fulfilling its dollar denominated loan obligations. However, a below expected bottom line may lead to a reduction in our FY2012 EPS target for the company. Nevertheless, the impact of the same could be limited by the current Supreme Court ruling on cancellation of 122 2G licenses, which, in our view, will remain positive for Bharti. Furthermore, for a long term prospective we remain positive on the company's fundamental performance and suggest a BUY on the stock at current juncture.

Source : Equity Bulls

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