RESULTS REVIEW 3QFY19 01 FEB 2019
Bharti Airtel BUY
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
Tough timesBharti Airtel’s 3QFY19 revenue at Rs 205.2bn (+0.5% QoQ) and EBITDA at Rs 62.2bn (-0.4%) was in-line. Key positives were (1) flat India wireless revenue after declining for nine consequent quarters and (2) flat consol EBITDA. This is against 6.5% CQGR decline in trailing four quarters and (3) 11mn 4G sub additions.
Strategically, we believe Bharti is moving in the right direction with aggressive 4G network roll-out, matching Jio on tariffs, mandating monthly recharge for low ARPU customers, strengthening balance sheet etc. to re-gain the lost revenue growth momentum. However, we are yet to see the meaningful growth revival as subscriber upgrades only neutralizes downgrade/churn.
That said, Jio is persistently raising the competitive bar through various innovations. Jio’s interest and aggression in media space may pose risk for Bharti.
Rising cash burn for all the telcos (including Jio) is the key hope for tariff increases. Maintain faith. We have marginally altered our revenue/EBITDA/debt assumptions. Reiterate BUY with SoTP of Rs 404 (earlier Rs 396). We value India Wireless business at 10x and Africa at 7.5x Dec-20E EV/EBITDA.
Key highlights India wireless business: Bharti altered its India wireless
subscriber definition. It now includes only revenue generating customers instead of active. This led to a 15% (48.4mn) QoQ decline in subs to 284mn, marginally ahead of Jio’s 280mn. Bharti will lag Jio in 4QFY19 on subscriber count moving to no. 3 position. We believe in management’s guidance of further decline in subscribers in 4QFY19/1QFY20 as full impact of minimum recharge plan kicks in. However, this will have negligible impact on revenues.
Reported ARPU stood at Rs 104 vs. Rs 100 QoQ. However on closing subs ARPU would stand at Rs 118.
Data subscribers grew by 9.8mn QoQ to 107.5mn viz. 38% of subscriber base. MBB subs growth was even more impressive at 11.3mn to 77mn. Data volumes grew by 21% QoQ to 3.22bn GBs and Usage/sub by 14% to 10.5GB/month.
Africa business continues to report healthy performance. Revenues/EBITDA increased by 4.5% QoQ, partly aided by rupee depreciation. EBITDA margin stood at 37% (flat QoQ and up 165 bps YoY). Subs additions were robust at 3.8mn to 97.9mn.
Near-term outlook: Competitive intensity though high, substantial pain is behind. But, resumption of revenue growth is inevitable for re-rating.
Consolidated Financial Summary (Rs bn) 3QFY19 3QFY18 YoY (%) 2QFY19 QoQ (%) FY17 FY18 FY19E FY20E FY21E Net Sales 205.2 203.2 1.0 204.2 0.5 954.7 836.9 818.0 868.4 937.4 EBITDA 62.2 74.7 (16.7) 62.4 (0.4) 353.3 300.8 256.4 281.3 329.8 APAT 0.9 3.1 (71.8) 1.2 (27.5) 38.0 11.0 (7.9) (37.7) (11.1) Diluted EPS (Rs) 0.2 0.8 (71.8) 0.3 (27.5) 9.5 2.7 (2.0) (9.4) (2.8) P/E (x) 32.8 113.5 NA NA NA EV / EBITDA (x) 6.7 7.7 9.5 8.8 7.4 RoE (%) 5.7 1.6 (1.1) (5.5) (1.7) Source: Company, HDFC sec Inst Research
INDUSTRY TELECOM
CMP (as on 01 Feb 2019) Rs 312
Target Price Rs 404
Nifty 10,894
Sensex 36,469
KEY STOCK DATA
Bloomberg BHARTI IN
No. of Shares (mn) 3,997
MCap (Rs bn) / ($ mn) 1,247/17,484
6m avg traded value (Rs mn) 2,223
STOCK PERFORMANCE (%)
52 Week high / low Rs 449/277
3M 6M 12M
Absolute (%) 6.3 (18.9) (28.9)
Relative (%) 0.3 (16.1) (30.4)
SHAREHOLDING PATTERN (%)
Promoters 67.1
FIs & Local MFs 13.9
FPIs 17.1
Public & Others 1.9
Source : BSE
Himanshu Shah
+91-22-6171-7315
Mansi Lall
+91-22-3021-2070
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Concall highlights
Key factors that will drive revenue growth are (a)
Subscriber upgrades from 2G to 4G. (b) Incremental
revenue contribution from minimum recharge plan.
This is despite slippage on customer number and (c)
benefits from price increase. Bharti has recently
increased prices on lowest Smartphone pack from Rs
99 to Rs 119.
Bharti’s management estimates ~750-800mn unique
sim users currently. It further expects 200-300mn
subscribers to convert into 4G subscribers over next
2-3 years i.e. largely a 4G market vs. current ~400mn
4G users.
Management highlighted that 200 of the total 700
districts accounts for 80% of the industry revenues.
Their focus remains on these districts.
Simultaneously, Bharti will expand its 4G services
from 1,000 to 5,000 cities in FY20.
In addition to revenue growth, Bharti expects the
costs structure to remain stable except access costs.
This we believe is feasible and appreciable. This is
despite increasing consumption. We have assumed a
moderate growth in operating costs.
Bharti expects capex intensity to start moderating
from FY20. This is on account of 4G capex on LTE and
transmission network rollout in FY18/19. Incremental
capacity expansion to be more modular base for TD-
LTE, negligible capex for 4G spectrum refarming in
900/2100 MHz band etc. Jio’s current data usage is
nearly 2.65x of Bharti. While there is plausibility of
Bharti’s capex moderating from current Rs 260-280bn
p.a., we still expect it to remain around Rs 200-220bn.
Bharti now treats Airtel Payments Bank operation as
associate instead of subsidiary. Bharti’s holding is
static at 80%. However, due to change in certain
shareholders rights, reclassification has got triggered.
Impact of IUC reduction from 1st Jan, 2020: With Jio
gaining market share, Bhari’s off-net minutes/total
minutes is on rise, leading to significant rise in access
costs. However, Bharti’s is net positive (IC revenue
less payout on OG). It further expects that there
would be negative impact on EBITDA as IUC is phased
out from 6p/min in Jan’20. We have estimated a
quarterly impact of ~Rs 4bn on account of this.
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Quarterly Financial Snapshot: Consolidated Rs Bn 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 % chg YoY % chg QoQ
Total revenues 217.8 203.2 196.3 200.8 204.2 205.2 1.0 0.5
IUC costs 25.6 19.5 20.3 21.4 23.3 24.5 25.2 5.0
Net revenue 192.2 183.6 176.1 179.4 180.9 180.7 -1.6 -0.1
License fees 19.7 17.5 17.5 17.0 17.7 17.5 -0.4 -1.3
Network costs 50.5 47.4 48.1 50.7 56.1 57.5 21.5 2.6
Employee costs 10.1 9.6 9.9 9.7 9.4 9.5 -0.6 1.8
SG&A 32.7 34.5 31.3 34.9 35.4 34.0 -1.3 -3.9
Total Opex (ex IUC) 112.9 109.0 106.8 112.2 118.5 118.6 8.8 0.0
EBITDA 79.2 74.7 69.3 67.3 62.4 62.2 -16.7 -0.4
D&A 46.9 48.4 49.0 51.5 52.4 54.7 13.1 4.5
EBIT 32.3 26.3 20.3 15.8 10.1 7.5 -71.7 -25.9
Finance cost (net) 23.3 20.9 18.3 21.3 29.9 19.4 -6.9 -34.9
Share in JVs/Associates
3.7 2.3 1.8 1.7 1.6 (0.1) -104.3 -106.0
Other (inc)/exp 4.2 3.0 2.6 2.7 2.3 0.6 -80.5 -75.2
PBT 13.0 8.4 4.4 (2.8) (18.5) (12.1) -244.8 -34.5
Tax expense 5.3 0.4 (3.0) (11.3) (22.5) (1.8) -581.3 -91.9
EO exp/(inc) 1.8 2.4 3.2 3.6 1.4 (14.1) -690.3 -1075.6
PAT (after EO items) 5.9 5.6 4.2 4.8 2.5 3.8 -31.8 53.5
Minority Interests 2.4 2.5 3.4 3.8 1.3 3.0 16.3 127.3
Net Income 3.4 3.1 0.8 1.0 1.2 0.9 -71.8 -27.5
Source: Company, HDFC sec Inst Research
Sharp increase in access costs QoQ due to adverse minute mix and network costs due to rising 4G consumption and merger of Voda-Idea impacting tower rentals. This were key negatives Lower finance costs QoQ owing to derivatives and exchange gain vs. loss in previous quarter and higher investment income
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Margin Analysis (%)
2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 chg YoY (bps) chgQoQ (bps)
IUC costs 11.8 9.6 10.3 10.6 11.4 11.9 231 52
License fees 9.1 8.6 8.9 8.5 8.7 8.5 -12 -15
Network costs 23.2 23.3 24.5 25.2 27.5 28.0 473 59
Employee costs 4.6 4.7 5.1 4.8 4.6 4.6 -7 6
SG&A 15.0 17.0 15.9 17.4 17.3 16.6 -39 -75
Total Opex (ex IUC) 51.9 53.6 54.4 55.9 58.0 57.8 415 -25
EBITDA 36.4 36.8 35.3 33.5 30.6 30.3 -646 -27
D&A 21.5 23.8 25.0 25.6 25.6 26.7 286 103
EBIT 14.9 13.0 10.3 7.9 4.9 3.6 -932 -130
Finance costs 10.7 10.3 9.3 10.6 14.6 9.5 -80 -514
Profit before Tax 6.0 4.1 2.2 (1.4) (9.1) (5.9) -1004 316
Net Income 1.6 1.5 0.4 0.5 0.6 0.4 -109 -16
Source: Company, HDFC sec Inst Research
Bharti protected its margin well despite the pressure on revenue led by its focus on costs management viz. ‘war on waste’ However, steep rise in access (loss of subscribers to Jio and higher bundled package sales with unlimited voice) and network costs has led to sharp erosion in margin in 1HFY19
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Segment-wise Financial Performance Revenues (Rs Bn) 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 % chg YoY % chgQoQ
Mobile 122.5 107.5 103.5 104.8 102.5 101.9 -5.2 -0.6
Home 6.4 6.2 6.0 5.7 5.6 5.5 -10.6 -1.9
Digital 9.4 9.6 9.6 9.9 10.2 10.3 7.1 0.9
Business 28.3 29.1 28.3 29.9 33.5 31.1 6.9 -7.0
Towers 16.6 16.9 16.7 16.9 17.2 17.3 2.2 0.7
Others 1.0 1.0 1.0 0.4 0.5 - -100.0 -100.0
India 184.1 170.4 165.2 167.7 169.6 166.2 -2.5 -2.0
South Asia 1.0 1.0 1.0 1.1 1.1 1.1 11.6 0.7
Africa 52.0 51.3 49.7 52.8 56.5 59.0 15.1 4.5
(-) Intersegment (18.3) (18.5) (18.6) (19.8) (21.8) (20.0) 8.3 -8.3
Total 217.8 203.2 196.3 200.8 204.2 205.2 1.0 0.5
EBITDA (Rs Bn) 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 % chg YoY % chgQoQ
Mobile 42.1 35.1 29.4 27.6 21.5 19.5 -44.4 -9.2
Home 2.7 3.1 3.0 2.9 2.9 2.6 -15.9 -11.9
Digital 3.5 3.7 3.7 4.0 4.0 3.8 3.2 -3.4
Business 9.9 11.7 11.5 10.4 10.8 9.9 -15.5 -8.2
Towers 8.1 8.3 8.1 7.8 8.0 8.5 2.3 6.8
Others (0.9) (1.8) (0.7) (1.2) (1.5) - -100.0 -100.0
India 65.5 60.1 55.1 51.5 45.6 44.3 -26.3 -2.9
South Asia (0.0) 0.0 0.1 0.0 0.0 0.0 130.4 39.3
Africa 16.8 18.2 17.9 19.2 20.9 21.9 20.4 4.5
(-) Intersegment (3.0) (3.6) (3.7) (3.5) (4.2) (4.0) 12.2 -3.4
Total 79.2 74.7 69.3 67.3 62.4 62.2 -16.7 -0.4
Margin % 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 chg YoY (bps) chgQoQ (bps)
Mobile 34.4 32.6 28.4 26.3 20.9 19.1 -1350 -180
Home 42.6 49.9 49.7 49.8 49.8 49.7 -18 -4
Digital 37.5 38.5 38.6 40.4 39.2 39.4 94 23
Business 35.1 40.1 40.5 34.8 38.5 38.0 -218 -55
Towers 48.9 49.1 48.7 46.1 47.4 46.9 -217 -54
India 35.6 35.3 33.3 30.7 26.9 26.7 -862 -26
South Asia -1.4 1.8 6.5 0.9 2.7 3.7 191 102
Africa 32.2 35.4 35.9 36.4 37.1 37.0 164 -3
Blended 36.4 36.8 35.3 33.5 30.6 30.3 -646 -27
Source: Company, HDFC sec Inst Research
Segment-wise QoQ/YoY EBITDA performance is not strictly comparable as India Corporate overheads are now part of segment instead of Others
Net sub additions at 14mn and data subs at 15mn are key positives ARPU of 4G/data subscribers
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Operating KPIs
2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 chg YoY chgQoQ
India Wireless KPIs
Customer Base ('000s) 282,047 290,113 304,192 344,564 332,764 284,224 -2.0 -14.6
Net Additions ('000s) 1,400 8,066 14,079 40,372 (11,800) (48,539) NA NA
Monthly Churn (%) 3.9 3.3 2.8 2.0 4.1 7.3 NA NA
ARPU (Rs/month) 145 123 116 105 100 104 -15.5 4.1
MOU (min/month) 518 575 670 700 686 726 26.3 5.8
Minutes on network (mn mins) 437,142 494,546 592,657 684,191 693,061 702,881 42.1 1.4
Data KPIs
Data subs ('000s) 65,769 70,836 86,077 94,783 97,666 107,511 48.5 3.0
- Mobile Broadband subs 28,306 36,367 47,862 58,281 65,731 77,068 132.2 12.8
As % of customer base 23.3 24.4 28.3 27.5 29.4 37.8
Total MBs on the network (mn MBs) 783,809 1,105,839 1,539,746 2,150,645 2,660,297 3,216,897 190.9 20.9
Usage per customer (MBs/month) 4,087 5,349 6,585 7,864 9,221 10,528 96.8 14.2
DTH
Digital TV Customers ('000s) 13,521 13,937 14,168 14,646 14,779 15,001 7.6 1.5
Net additions 207 416 230 479 133 222 -46.6 67.5
Average Revenue Per User (ARPU) 233 233 228 229 232 231 -1.0 -0.3
Monthly Churn 1.36% 1.23% 1.10% 0.72% 1.34% 1.31% 8 bps -3 bps
Africa
Customer Base ('000s) 78,742 84,130 89,262 91,193 94,096 97,922 16.4 4.1
Net Additions 1,881 5,388 5,133 1,930 2,903 3,827 -29.0 31.8
Monthly Churn (%) 4.7% 4.1% 4.1% 4.9% 4.8% 4.7% 12.8 -3.3
ARPU (US$/month) 3.2 3.2 3.0 2.9 3.0 3.0 -5.6 0.4
MOU (min/month) 164 172 172 183 189 183 6.2 -2.9
Minutes on network (mn mins) 38,406 41,928 44,688 49,666 52,357 52,445 25.1 0.2
Source: Company, HDFC sec Inst Research
Decline in subscriber base is owing to change in definition to revenue generating from active subscribers, a welcome move in our view as it provides true representation.
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Key Assumptions
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E
India Wireless
Subs (Mn) 188.2 205.5 226.0 251.2 273.6 304.2 279.2 299.2 339.2
Net Adds (Mn) 6.9 17.3 20.5 25.2 22.4 30.5 (25.0) 20.0 40.0
Implied ARPU (Rs)* 194.3 197.6 200.7 195.8 179.6 133.4 117.6 121.0 120.8
Revenue (Rs Bn) 430.7 466.8 519.6 560.8 565.5 462.6 411.7 419.9 462.6
Incremental Rev (Rs Bn) 43.4 36.1 52.8 41.1 4.8 (102.9) (50.9) 8.2 42.7
EBITDA (Rs Bn) 129.6 157.6 194.7 219.2 227.7 150.9 90.0 96.3 131.5
Incremental EBITDA (Rs Bn) (7.1) 28.0 37.2 24.5 8.5 (76.8) (60.9) 6.3 35.2
EBITDA Margin () 30.1 33.8 37.5 39.1 40.3 32.6 21.9 22.9 28.4
Africa
Subs (Mn) 63.7 69.4 76.3 74.7 80.1 89.3 101.1 113.7 124.7
Net Adds (Mn) 10.6 5.7 6.8 (1.6) 5.4 9.2 11.9 12.6 10.9
Implied ARPU (Rs) 342.9 341.1 307.8 277.5 236.5 198.4 201.5 203.6 197.9
Revenue (Rs Bn) 240.4 272.5 269.1 251.3 219.6 201.6 230.2 262.5 283.1
Incremental Rev (Rs Bn) 42.2 32.1 (3.4) (17.7) (31.8) (18.0) 28.6 32.4 20.6
EBITDA (Rs Bn) 63.1 71.3 61.1 52.9 52.3 66.4 85.6 105.1 118.7
Incremental EBITDA (Rs Bn) 10.4 8.1 (10.2) (8.2) (0.6) 14.1 19.2 19.6 13.5
EBITDA Margin () 26.3 26.2 22.7 21.0 23.8 32.9 37.2 40.0 41.9
Consolidated Revenue (Rs Bn)
India Wireless 431 467 520 561 566 463 412 420 463
Home Broadband 36 39 44 25 28 25 22 21 21
Digital 16 21 25 29 34 38 41 46 51
Enterprise 53 63 67 97 109 114 124 130 137
Passive Infra 50 51 54 56 61 66 68 69 69
Others 3 3 3 3 4 4 1 1 1
India Business 589 645 713 771 801 709 669 687 742
South Asia 12 17 16 16 12 4 4 5 5
Africa 240 273 269 251 220 202 230 263 283
Gross revenues 842 934 998 1,039 1,033 915 904 954 1,030
(-) Intersegment (60) (58) (62) (57) (66) (74) (82) (86) (93)
Net revenues 782 876 936 982 966 841 821 868 937
Intersegment as of gross 7.1 6.2 6.2 5.5 6.4 8.1 9.1 9.0 9.0
Revival in revenue growth is the key re-rating trigger
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E
Consolidated EBITDA (Rs Bn)
India Wireless 130 158 195 219 228 151 90 96 132
Home Broadband 15 15 18 11 13 12 11 10 10
Digital 0 3 7 10 12 14 16 17 20
Enterprise 9 14 14 30 34 42 41 42 44
Passive Infra 23 23 26 26 29 33 32 29 28
Others (2) (2) (1) (2) (4) (4) (4) (3) (3)
India Business 174 210 258 295 312 248 186 193 231
South Asia 0 0 (0) (1) 0 0 0 0 0
Wireless - Africa 63 71 61 53 52 66 86 105 119
Gross EBITDA 237 281 319 347 365 314 272 298 350
(-) Intersegment (5) (4) (8) (7) (11) (13) (15) (17) (20)
Net EBITDA 233 278 312 340 353 301 256 281 330
EBITDA Margin
India Wireless 30.1 33.8 37.5 39.1 40.3 32.6 21.9 22.9 28.4
Home Broadband 41.1 37.5 40.7 42.5 47.2 46.7 49.7 49.2 49.2
Enterprise 2.8 16.1 27.3 34.2 35.6 37.9 38.7 38.1 38.1
Passive Infra 16.6 21.8 20.9 31.3 31.0 37.4 32.9 32.4 32.4
DTH 45.1 44.7 47.4 47.1 48.0 49.1 46.6 42.9 41.0
India Business 29.6 32.6 36.2 38.2 39.0 34.9 27.8 28.1 31.2
Wireless - Africa 26.3 26.2 22.7 21.0 23.8 32.9 37.2 40.0 41.9
Net EBITDA 29.7 31.7 33.3 34.6 36.6 35.8 31.2 32.4 35.2
Source: Company, HDFC sec Inst Research
Improvement in India Wireless EBITDA margin is premised on revenue growth and optically on account of abolition of 6p/min IUC wef 1st Jan, 2020
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Valuation Snapshot
Segments Dec-20 EBITDA
(Rs Bn) Dec-20 EBITDA/
Share (Rs) Multiple
(X) Enterprise Value
(Rs Bn) Value Per Share
(Rs)
India Wireless 125 31 10.0 1,253 313
Telemedia services 10 3 7.5 76 19
Enterprise 44 11 7.5 329 82
DTH 19 5 9.0 172 43
Wireless – Africa*** 115 29 7.5 605 151
Others* (3) (1) 10.0 (28) (7)
Sub-total 311 78 7.7 2,407 602
Passive Infra**
339 85
Enterprise Value
2,746 687
(-) Net Debt
1,132 283
Target Price
1,614 404
* Others include South Asia, Corporate costs etc; ** Passive Infra business value is basis our Bharti Infratel (incl Indus) value of Rs 920bn @ TP of Rs 344 pro-rated for Bharti's 37% stake *** We have assumed Bharti’s stake and debt in Africa @ 70%
Change in estimates
Old New change
FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E
Revenue 813.6 844.8 904.4 818.0 868.4 937.4 0.5 2.8 3.7
EBITDA 252.8 269.5 323.5 256.4 281.3 329.8 1.5 4.4 1.9
EBITDA margin 31.1 31.9 35.8 31.3 32.4 35.2 28 bps 50 bps -59 bps
APAT (18.8) (34.4) (4.1) (7.9) (37.7) (11.1) (58.1) 9.8 169.4
Source: HDFC sec Inst Research
Peer Set Comparison
Company Mcap
(Rs bn) CMP (Rs)
TP (Rs)
Rating (Rs)
EV/EBITDA (X) P/E (X) ROE (%)
FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E
Bharti Airtel 1,247.4 312 404 BUY 9.5 8.8 7.4 NA NA NA (1.1) (5.6) (1.8)
Idea Cellular 490.6 31 43 BUY 17.2 34.5 17.2 NA NA NA (48.5) (26.9) (20.8)
Bharti Infratel 548.0 296 344 BUY 7.9 8.9 9.1 21.5 21.5 21.0 16.1 17.9 17.5
Source: HDFC sec Inst Research
Reduction in our FY20-21E revenue estimate is owing to persistent down-trading of customers, delayed recovery in ARPU and the impact of abolition of 6p/min IUC wef Jan’2020 Decline in EBITDA is led by revenue drop further accentuated by steep increase in access and network opex
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Consolidated Income Statement (Rs bn) FY17 FY18 FY19E FY20E FY21E
Total revenues 954.7 836.9 818.0 868.4 937.4
Access charges 102.8 90.4 93.9 94.0 70.0
Net revenue 851.9 746.4 724.1 774.4 867.4
License fees 92.8 75.6 69.2 71.8 80.3
Network costs 209.2 197.5 222.2 244.0 268.8
Employee costs 43.0 39.8 38.4 40.8 43.8
SG&A 153.7 132.8 137.8 136.5 144.6
Total Opex 498.6 445.6 467.7 493.1 537.6
EBITDA 353.3 300.8 256.4 281.3 329.8
EBITDA / Total revenues 37.0 35.9 31.3 32.4 35.2
D&A 197.7 192.4 213.6 224.0 227.7
EBIT 155.6 108.4 42.9 57.3 102.1
Finance cost (net) 77.0 80.7 93.5 99.2 100.2
JV / Associates gain/(loss) 10.4 10.6 3.9 1.3 1.1
Other income 1.2 2.5 3.1 2.7 2.7
Non-operating income / expenses, (net)
(1.3) (0.1) (1.8) - -
Profit before Tax 88.9 40.6 (45.6) (37.8) 5.7
Income tax expense 34.8 10.8 (39.8) (13.2) 2.0
Exceptional Items (net of tax) 11.7 7.9 (9.1) - -
Profit after tax (after exceptional items)
42.4 21.8 3.3 (24.6) 3.7
Non Controlling Interest 4.4 10.8 11.1 13.2 14.8
Net income 38.0 11.0 (7.9) (37.7) (11.1)
Source: Company, HDFC sec Inst Research
Consolidated Balance Sheet (Rs bn) FY17 FY18 FY19E FY20E FY21E
SOURCES OF FUNDS
Equity Capital 20.0 20.0 20.0 20.0 20.0
Reserves & Surplus 654.6 675.4 680.2 642.5 631.4
Shareholders Fund 674.6 695.3 700.2 662.5 651.4
Minority Interest 68.8 88.1 124.0 137.2 152.0
ST Borrowings 246.1 345.1 332.1 323.7 304.7
LT Borrowings 899.1 854.8 1,000.9 976.1 919.5
Total Loans 1,145.2 1,200.0 1,333.0 1,299.8 1,224.2
Other non-current liabilities 55.6 85.1 79.9 84.8 90.0
Total Liabilities 1,944.2 2,068.6 2,237.1 2,184.3 2,117.6
APPLICATION OF FUNDS
PPE 644.0 758.2 885.8 911.8 909.1
Net intangible assets 1,246.7 1,211.3 1,212.3 1,212.3 1,212.3
Investment in JV/Associates 82.3 86.8 90.1 93.8 97.6
Other non-current assets 151.3 114.5 173.2 180.2 187.6
Non-current assets 2,124.4 2,170.8 2,361.4 2,398.1 2,406.6
Trade and receivables 49.8 58.8 49.6 51.4 58.0
Other current assets 120.2 140.5 169.1 176.1 178.8
Current assets 170.1 199.3 218.6 227.5 236.8
Deferred revenue 48.8 48.7 44.8 47.5 50.5
Trade & other payables 268.5 277.7 257.8 273.7 290.4
Other current liabilities 66.0 110.9 181.6 192.7 204.5
Current Liabilities 383.3 437.3 484.2 513.9 545.4
Net Current Assets (213.3) (238.0) (265.5) (286.4) (308.7)
C&CE 33.1 135.7 141.2 72.5 19.7
Total Assets 1,944.2 2,068.6 2,237.1 2,184.3 2,117.6
Source: Company, HDFC sec Inst Research
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Consolidated Cash Flow Year ending March (Rs bn) FY17 FY18 FY19E FY20E FY21E
Reported PAT 42.4 21.8 3.3 (24.6) 3.7
Depreciation 197.7 192.4 213.6 224.0 227.7
Interest 77.0 80.7 93.5 99.2 100.2
Working Capital Change (98.1) 24.7 27.6 20.8 22.3
OPERATING CASH FLOW ( a ) 219.0 319.6 338.0 319.5 353.9
Capex (308.5) (271.2) (342.2) (250.0) (225.0)
Free Cash Flow (89.5) 48.4 (4.2) 69.5 128.9
Investments & Others 15.5 61.8 (67.2) (5.8) (5.9)
INVESTING CASH FLOW ( b ) (293.0) (209.4) (409.4) (255.8) (230.9)
Capital Issuance (17.0) 44.1 49.5 16.9 24.1
Debt Issuance 138.7 54.8 133.0 (33.2) (75.6)
Interest (77.0) (80.7) (93.5) (99.2) (100.2)
Dividend & others (4.8) (25.7) (12.1) (16.9) (24.1)
FINANCING CASH FLOW ( c ) 40.0 (7.6) 76.9 (132.4) (175.8)
NET CASH FLOW (a+b+c) (34.0) 102.6 5.5 (68.7) (52.8)
Opening C&CE 67.1 33.1 135.7 141.2 72.5
Closing C&CE 33.1 135.7 141.2 72.5 19.7
Source: Company, HDFC sec Inst Research
Key Ratios FY17 FY18 FY19E FY20E FY21E
PROFITABILITY ()
EBITDA Margin 37.0 35.9 31.3 32.4 35.2
EBIT Margin 16.3 12.9 5.2 6.6 10.9
APAT Margin 4.0 1.3 (1.0) (4.3) (1.2)
RoE 5.7 1.6 (1.1) (5.5) (1.7)
RoIC (or Core RoCE) 5.2 4.1 0.3 1.8 3.2
RoCE 5.1 4.0 0.3 1.7 3.1
EFFICIENCY
Tax Rate () 39.2 26.7 87.3 35.0 35.0
Fixed Asset Turnover (x) 0.5 0.4 0.4 0.4 0.4
CA (days) 65 87 98 96 92
CL (days) 147 191 216 216 212
Cash Conversion Cycle (days) (82) (104) (118) (120) (120)
Net D/EBITDA (x) 3.15 3.54 4.65 4.36 3.65
Net D/E (x) 1.65 1.53 1.70 1.85 1.85
Interest Coverage (x) 2.0 1.3 0.5 0.6 1.0
PER SHARE DATA (Rs)
EPS 9.5 2.7 (2.0) (9.4) (2.8)
CEPS 59.0 50.9 51.5 46.6 54.2
Dividend 1.0 5.3 2.5 3.5 5.0
Book Value 168.8 173.9 175.2 165.7 162.9
VALUATION
P/E (x) 32.8 113.5 NA NA NA
P/BV (x) 1.8 1.8 1.8 1.9 1.9
EV/EBITDA (x) 6.7 7.7 9.5 8.8 7.4
EV/Revenues (x) 2.5 2.8 3.0 2.8 2.6
OCF/EV () 9.3 13.8 13.9 12.9 14.4
FCF/EV () (3.8) 2.1 (0.2) 2.8 5.3
FCFE/Mkt Cap () (13.4) (2.6) (7.8) (2.4) 2.3
Dividend Yield () 0.3 1.7 0.8 1.1 1.6
Source: Company, HDFC sec Inst Research
BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Date CMP Reco Target
13-Apr-18 381 BUY 490
26-Apr-18 420 BUY 487
6-Jul-18 363 BUY 460
29-Jul-18 365 BUY 455
9-Oct-18 295 BUY 410
27-Oct-18 297 BUY 340
9-Jan-19 313 BUY 396
1-Feb-19 312 BUY 404
RECOMMENDATION HISTORY
200
300
400
500
600
700
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
De
c-1
8
Jan
-19
Feb
-19
Bharti Airtel TP
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BHARTI AIRTEL : RESULTS REVIEW 3QFY19
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