Bharti Airtel - Reversal in operating performance, strong free cash flows positives - Microsec

Bharti Airtel Ltd announced Consolidated Q2 FY2013 results on 07 November 2012. While the company's top line came above our as well as Bloomberg consensus estimates, its bottom line remained in line with estimates.

While Bharti's top line increased 4.8% q-o-q to Rs.20,283.0 Crores, its bottom line shrunk 5.4% sequentially to Rs.721.2 Crores. On prima facie the results seems good, however, adjusting for the favorable judgment of TDSAT, the top line came just in line with estimates at Rs.19,696.9 Crores, representing a sequential growth of 1.7%. The one time factor also had a favorable impact of Rs.344.8 Crores on EBIDTA. Nevertheless, even after adjusting for the same, the company's EBIDTA margins expanded 29 basis points (bps) sequentially to 30.5%. The positive trend in EBIDTA margins as well as Free Cash Flows standing healthy at Rs.2,295.9 Crores bode well for Bharti. The growth in top line was mainly aided by rising customer base as well as steady Average Revenue per Minute (ARPM) at 42.6p. In addition, strong performance in Africa aided to the top line growth. Bharti witnessed a significant traction in Data Services with ~9% sequential improvement in Data Average Revenue per User (ARPU) at Rs.43. The increase in data ARPU was led by 19% expansion in Data Usage per Customer. Improvement in Free Cash Flows, robust Data Services performance.

Bharti came up with another quarter of subdued performance in Q2 FY2013, however, we believe that emerging clarity on regulatory front may remain beneficial for the company. Furthermore, allowance to retain 2.5MHz of spectrum in 900MHz band is positive for the company along with its peers Idea, Vodafone, and BSNL. Although the industry's performance may remain subdued in near term, we continue to remain bullish on Bharti with a long term perspective.

Source : Equity Bulls

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