Bharti Airtel Q4 results: Key takeaways for investors

Airtel reported results for Q4 that can be viewed as generally included to positive. While revenue missed the consensus (Bloomberg) by 1.8 percent, EBITDA margins were better and EBIDTA was in line with the consensus. EBITDA margin was strong at 52.2%, up 20 basis points quarter-over-quarter and 140 basis points year-over-year. EPS beat expectations by four percent. Overall, the cadence on EBITDA margin outweighs lost revenue.

sector performance

Airtel in India and its small business in South Asia accounted for 70 percent of revenue/EBITDA, with the business in Africa making up the remaining 30 percent.

Within this, Airtel’s India mobile business is the main fulcrum accounting for 54 percent of revenue and about 56 percent of EBITDA.

Airtel’s India mobile business continued to lag behind close competitor Reliance Jio (RJio) in terms of growth. In the fourth quarter, Airtel reported year-over-year revenue and EBITDA growth of 12 and 19 percent, respectively, matching RJio’s revenue growth of 12 percent and outpacing RJio’s EBITDA growth of 16.7 percent.

QoQ’s flat ARPU was at ₹193. While some might view this as a bit disappointing, this too was no different from the trend seen in RJio which reported a flat ARPU at ₹178.8.

The other major segment within India operations – Airtel Business (13 percent of consolidated revenue), which mainly consists of B2B connectivity, cloud and allied services, also performed well with year-on-year revenue growth of 14 percent.

Business in Africa With a presence in 14 countries on the continent, revenue and EBITDA (in dollars) grew by 19 and 17 percent year-on-year, respectively. It continues to present a healthy growth opportunity with mobile data customer base (3G/4G) accounting for 39 percent of Airtel’s mobile customer base. And the same in India is 70 per cent now.

What should investors do?

Airtel continues on a path of steady progress – strengthening its position in the mobile business in India, capitalizing on growing opportunities in B2B and other segments, and capitalizing on growth opportunities in Africa. Trading at a forward one-year EV/EBITDA of 8.3x (five-year average at 8.7), the risk-reward ratio remains favorable for the stock. Strong position in the Indian mobile market on the cusp of the 5G revolution, and well capitalized on the digital connectivity trends that are likely to grow at a rapid pace in the current decade driven by topics such as IoT, autonomous driving/connected cars, drones, etc. To her credit though, these themes will take a long time to gain size.

Overall, the current and long-term fundamentals make the stock an interesting bet. We keep Earlier rating build up on stocks.