Broker’s call: Bharti Airtel (Buy)

Target: INR 935

CMP: INR 799.70

Rural Expansion and 5G Deployment Underway Airtel is strengthening its network with rural expansion and deployment of 5G services. On 4QFY23, Airtel had the highest quarterly tower additions in its history. This resulted in the number of postpaid subscribers increasing at a double rate in 2004 and the subscription rate declining.

However, translation into revenue growth was limited in the fourth quarter due to stable tariffs and fewer days than the prior quarter. Although capex was up, capex/sales was well below its recent peak as revenue expanded significantly.

While it remains uncertain whether the next tariff increase will be in FY24 or post-election in FY25, we expect Airtel to report an India mobile CAGR of 15 per cent during FY23. -25 coupled with a decrease in capital expenditures with rural and primary expansion. 5G deployment will be on the back.

We cut India Telephone revenue for the fiscal year 24/25 by 4 per cent / 3 per cent and EBITDA by 3 per cent / 2 per cent amid delays in raising tariffs. We’re also adding higher interest and amortization costs on higher capital expenditures, which leads to steeper EPS downgrades.