Q3FY24 Preview: Bharti Airtel: Revenue seen at ₹ 378,853 Million, PAT at ₹ 31,534 Million

2 Feb 2024 , 12:12 PM

Result date: February 5, 2024

Recommendation: Buy

Target price: ₹1,086

Analysts at IIFL Capital Services believe Bharti Airtel added 5.9 million 4G subscribers in Q3 versus 7.7 million in Q2. These factors should drive 1.7% sequential mobile revenue growth for the company. Analysts at IIFL Capital Services also note that the sharp increase in entry-level tariff hikes means that the ARPU uplift on 2G-to-4G upgrade is significantly lower for Bharti (and to some extent Vi) than it used to be five to six quarters back.

TRAI data for October showed 0.14 million home broadband net adds – similar to the recent months, and hence analysts at IIFL Capital Services expect healthy EBITDA growth to continue. The Enterprise segment may see slowdown in revenue growth to ~1% sequential (up 8% over the year-ago quarter), due to demand weakness in international markets. This will also limit the extent of EBITDA growth. DTH EBITDA is likely to be flattish sequentially. Net-net, analysts at IIFL Capital Services estimate the overall India EBITDA to grow 1.7% sequentially.

Currency headwinds may limit sequential EBITDA increase in Airtel Africa to ~2% in USD terms. Nigeria, the largest market in Africa, contributed 40% to Airtel Africa’s revenue in FY23. Nigeria let Naira float w.e.f. 15^th June, as opposed to a currency peg earlier. Subsequently, USD-NGN moved to ~760 by 30^th June from ~460 on 14^th June. In its Q1FY24 filing, Airtel Africa stated that every 1% depreciation of Naira versus USD would result in US$22mn/US$12mn annualized revenue/EBITDA hit. After the above round of devaluation, Nigeria’s contribution to Airtel Africa’s revenue shrank to 28% in Q2FY24. USD-NGN stayed between 780 and 800 for most part of Q3, but saw a sharp depreciation to ~895 in the last 10 days of December. Separately, Malawian Kwacha and Zambian Kwacha saw sharp depreciation of ~30% and 21% in Q3 versus the USD, respectively. On a revenue-weighted average basis, African currencies depreciated by 5.6% sequentially versus USD in Q3. With Q3 being a seasonally strong quarter, analysts at IIFL Capital Services expect 4% sequential constant currency revenue and EBITDA growth for Airtel Africa. With an estimated ~2ppt hit from currency headwinds, they estimate ~2% sequential revenue and EBITDA growth in USD terms. These currency movements also make us build in ₹9 Billion FX loss in Q3.

The company’s Profit After Tax or PAT could witness strong surge both sequentially as well as over the year-ago quarter. 

₹ Million	December 2023 estimates	YoY change	QoQ change
Revenue	378,853	5.8%	2.3%
EBITDA	199,056	7.9%	2.0%
EBITDA margin	52.5%	100 bps	(14) bps
Profit After Tax	31,534	98.6%	135.2%

Source: IIFL Research