Bharti Airtel - 1QFY14 Results - Nirmal Bang Institutional

- Bharti Airtel's (BAL) 1QFY14 revenue stood at Rs202.6bn, up 3.5% QoQ, marginally below our/Bloomberg consensus estimates by 0.8%/0.5%, respectively.

- The India mobile business witnessed impressive growth of 5.3% QoQ, aided by a 3.3% QoQ rise in voice revenue per minute (RPM). Data revenue growth continued to be healthy at 19.9% QoQ. Africa revenue was poor, down 5.2% QoQ, in US dollar terms.

- BAL's EBITDA margin rose 123bps QoQ, aided by strong margin expansion in the India mobile business (185bps QoQ). Higher-than-expected interest costs due to forex loss let to net profit growth of 35.5% QoQ at Rs6.9bn, 8.1%/4.4% below our/Bloomberg consensus estimates, respectively.

- It should be noted that BAL changed its accounting policy in respect of joint arrangements. Accounting standard “IFRS 11 on joint arrangements” has become mandatory, and from the earlier method of line-by-line consolidation it now reports this under the equity method.

- Currently, while regulatory headwinds appear to be stabilising and India business operational performance was impressive in 1QFY14, high debt levels remains an issue, particularly in the wake of rupee depreciation. Africa remains a drag on overall financial performance.

- The current valuation, at 5.1x FY15E EV-EBITDA, is not too demanding. We have downgraded our rating on BAL from Buy to Hold with a revised target price of Rs367 (Rs344 earlier).

Source : Equity Bulls

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