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Bharti Airtel Stocks Witness Quarterly Drop of 11.1 Percent

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Bharti Airtel reported an 11.1 percent quarterly drop in consolidated net profit to Rs.759.20 crore, which fell well below analysts' expectations. Despite an extraordinary gain of Rs.440 crore for the quarter and a near-doubling of other profits to Rs.83.9 crore, the company missed on the bottom line.

In India, the company's average revenue per user (ARPU) has dropped 13 percent in the quarter to Rs.145 per user, down from a three-year high of Rs.166 the previous quarter. The abolition of interconnect use charges on January 1 resulted in a significant drop in ARPU.

The telecom operator's customer base in India is said to have increased by 4.2 percent to 350.3 million in the third quarter. Revenue from operations dropped three percent to Rs 25,747.3 crore in the third quarter.

“Bharti posted a collective result that was largely in line with expectations, with higher-than-expected subscriber additions offset by a slightly weaker Arpu. However, it continues to outperform competitors, with sales market share up 390 basis points in the last five years. Though we expect short-term earnings headwinds from Covid-19 (moderation in subscriber additions) and rivalry, we expect Bharti's wireless business to rise at least 20 percent in revenue and Ebitda over the next two years”, according to the brokerage.

With a target price of Rs 730, CLSA formerly known as ‘Credit Lyonnaise Securities Asia’ is also bullish on the stock. The brokerage's sales in the March quarter exceeded expectations. India sales were up four percent sequentially, except IUC, according to the study. “Bharti's 4G penetration of 56 percent of its own subscribers ensures growth”, the company said.

On Tuesday, at 14:30 IST, the company's management will hold a conference call. UBS said it will look at management commentary on the second wave of Covid-19's possible effects, the overall outlook for mobile competition, and topics like floor tariffs and 5G spectrum auctions. It also stated that it will concentrate on ‘flattening Arpus' and the possible effect of recent freebies provided by all telcos in response to the pandemic.

“Overall, a positive collection of results, with Bharti outperforming Jio across the board. The effect of Covid-19's second wave on subscriber additions and ARPUs, on the other hand, will be a key metric to watch in the coming months. We recently conducted an in-depth analysis of the sector and conclude that Bharti is well positioned in it. We keep our ‘buy' recommendation on the stock with a Rs 665 price target”, UBS said.

Despite Dalal Street's subdued reaction to the telecom operator's March quarter results, analysts said the numbers were largely in line, and that they liked the steady Ebitda sans without any tariff hike, as well as the addition of quality 4G subscribers, superior network capacity, and growth in the home market.

Although earnings price quotes for the telecommunications driver have been reduced in part, analysts are optimistic about market share increases and have set cost goals of up to Rs.750, implying a potential advantage of up to 39 percent for the supply.

Citi has maintained an ‘acquire' rating on the stock, with a price target of Rs.685, based on its expectation that the company will continue to gain market share. Given that the supply has remained range bound for the previous few months, it noted that assessments are reasonable for the supply.

The March quarter energy was deemed ‘great' by Macquarie, which has a ‘outperform' rating on the stock. It claimed that the removal of IUC had the greatest impact on Arpu. Based on 8.1 times FY23 EV/Ebitda, it considers the supply worthy of a price target of Rs.747.

In an otherwise strong session for Dalal Road on Tuesday, the stock fell 2.26 percent to Rs 537. On Monday, it fell two percent, and it has now dropped for five sessions in a row.

“Overall, a positive collection of results, with Bharti outperforming Jio across the board. The effect of Covid-19's second wave on subscriber additions and ARPUs, on the other hand, will be a key metric to watch in the coming months. We recently conducted an in-depth analysis of the sector and conclude that Bharti is well positioned in it. We keep our ‘buy' recommendation on the stock with a Rs 665 price target”, UBS said.

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