Bharti Airtel: Brokerages Bullish, Predict 25% Growth with Tariff Hikes, 5G, and ARPU Rise

Bharti Airtel reported a 31.1% decline in consolidated net profit for the March quarter of FY 2023-24. The net profit fell short of analysts's estimates which ranged between ₹2,201 crore and ₹5,309 crore. Despite this, the company's consolidated revenue rose by 4.4% year on year to ₹37,599 crore impacted by the devaluation of African currencies especially the Nigerian Naira. Despite the profit dip Bharti Airtel's shares rose by 2% to ₹1,336.10 per share on the NSE at 9.25 am reflecting investor confidence.

Capital Expenditure

The telecom giant increased its capital expenditure for the quarter to ₹10,500 crore up from ₹9,300 crore in the previous quarter driven by its 5G rollout in rural areas. However, the management expects capex to decline in FY25 compared to FY24 as monetizing 5G infrastructure remains challenging. HSBC highlighted potential positive outcomes from reduced capex intensity.

ARPU and Tariff Hikes

Bharti Airtel added 7.8 million smartphone customers and achieved an industry leading average revenue per user or ARPU of Rs 209. The company aims to raise its ARPU to Rs 300 through planned tariff hikes. Motilal Oswal noted that even at ₹300, Airtel's ARPU would be the lowest globally. The management emphasized the need for tariff increases to improve industry return ratios but is waiting for the right moment to implement them to avoid negative impacts if competitors do not follow suit.

Outlook and Brokerage Ratings

Brokerages remain optimistic about Bharti Airtel's future. Analysts expect the company to benefit from tariff hikes, robust performance in enterprise and home segments and a projected 20% CAGR in consolidated EBITDA over FY25F-26F despite challenges in the African market.

Nomura: Bullish on Bharti Airtel due to peak out net debt, declining capex, strong cash flows and improved return ratios. Increased target price to ₹1,550 retaining a buy rating.

Motilal Oswal: Sees a 25% upside raising the target price to ₹1,640 per share citing Bharti's superior subscriber base and potential in the 5G landscape.

Nuvama Institutional Equities: Raised target price to ₹1,600 from ₹1,580 maintaining a buy call. Highlighted Bharti's advantageous position for post election tariff hikes.

Final Words

Bharti Airtel is favored by experts due to its strategic initiatives, strong market position and potential for growth amidst industry changes. The company's focus on digital and enterprise initiatives along with its 5G expansion positions it well for future success. Investors are advised to consider these factors when making decisions about buying, selling or holding Bharti Airtel shares.