Bharti Airtel's Q2 Results Could Change The Dull Sentiment On The Stock

On Tuesday, Bharti Airtel reported a sharp improvement in its net loss at Rs 763 crore for the September ended quarter from Rs 23,405 crore in the same period last year. It also recorded its highest ever quarterly revenue of Rs 25,785 crore for the period under review.

With such an impressive improvement, it could be now be expected that investors may change their bearish outlook on the stock which has seen 20 percent correction in a month's time.

Q2 results highlights

• 22% growth in sales revenue at Rs 25,785 crore- its highest ever
• sixth straight quarter of losses
• added 1.4 crore 4G customers (48.1% jump y-o-y) to 15.27 crore
• data consumption jumped 58% to 7,403 petabyte
• average per subscriber data consumption was 16 GB
• data tariff increased to 77.3 PB per day compared with 48.9 PB/day in April-June
• more than 10 percent of the total AGR (adjusted gross revenue) dues already paid
• ARPU (average revenue per user) at Rs 162 compared to Rs 154 in Q1 and Rs 128 in Q2FY20
• EBIT margin at 17%
• Net debt rose to Rs 1,37,841 crore from Rs Rs 1,16,540 crore in the previous quarter
• Bharti Airtel to exit Ghana business (AirtelTigo)

Share price

Shares of Bharti Airtel have seen a sharp correction since 1 September, that is, after the Supreme Court's verdict on AGR, where it was ruled that the telecom operators will be allowed 10 years to make staggered payment of their dues to the Department of Telecom.

The verdict gave hope to debt-ridden Vodafone Idea's revival, ending expectations of a duopoly in the Indian telecom scene (with Bharti Airtel and Reliance Jio as the only players).

A delay in announcing a hike in tariffs may have also been a factor for diminishing interest in the stock.

Shares of the company fell from Rs 550 on 2 September to less than Rs 400 in October, an over 30% decline in value.

Brokerage reviews

Last week, before the Q2 results, foreign brokerage firm Bernstein Research placed an "Outperform" rating on the stock with a target price of Rs 600. It said that it expects Bharti Airtel to be a long term winner.

"Telecom in India is a consolidating market with Reliance Jio and Bharti Airtel holding nearly 70% share while Vodafone Idea market share is bleeding. The long term market dynamics are positive with rising average revenue per user or ARPU (nearly 13% CAGR), still-low user penetration (near 70%), and low smartphone mix (nearly 50%)," it had said in its report dated 22 October.

On Tuesday, Keshav Lahoti of Angel Broking said that the telecom operator reported better than expected Q2 numbers. The brokerage is bullish on Bharti Airtel, considering that industry dynamics are now looking favourable and expects Airtel to gain revenue market share going ahead.

Further, given that the stock has corrected 30% from its high, Lahoti sees valuation comfort.

Disclaimer

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