Bharti Airtel Ltd Stock Analysis with Q2FY21 Results

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Introduction

Sunil Mittal owned Bharti Airtel reported its Q2FY21 results recently. The stock also showed a decent rally this week after going through a sluggish period.

Let us discuss the reasons behind the recent stock price rally in Bharti Airtel as well as let us analyze the latest quarterly results in this blog.

Bharti Airtel Ltd Q2FY21 Results Analysis

Let us understand the reasons behind the recent rally in stock price.

1. Foreign Ownership Limit going down to 49% and a nod to raise Foreign Investment Limit to 100%

  • Airtel has got permission to raise Foreign Investment Limit to 100%. This would provide Foreign Institutional Investors an opportunity to increase their investments in Airtel.
  • This ultimately might result in Airtel’s weight going up in world indices like MSCI India Index from 1.8% to 5.4%,
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Changes in ownership for Bharti Airtel Ltd
Changes in ownership for Bharti Airtel Ltd

2. Decent Q2FY21 Results

Increasing Average Revenue Per User (ARPU)
Q2FY21 ARPU - Bharti Airtel Ltd
Q2FY21 ARPU – Bharti Airtel Ltd

The company is able to consistently increase its ARPU over the last few quarters.

Consolidated Q2FY21 Results
Bharti Airtel Ltd - Consolidated Financials Q2FY21
Bharti Airtel Ltd – Consolidated Financials Q2FY21

  • Company has recorded robust growth in revenue and EBITDA, resulting in strong EBITDA margins.
  • This has resulted in strong operating efficiency with an EBIT margin of 17.1%.
  • Company has reported losses in PBT for previous quarters, however for Q2FY21, company has reported a profit of 518 crores.
  • However, due to tax-related adjustments, the company has reported a net loss in this quarter.
  • These results show that the company is again retracting its way back to its profitability.
  • The company has made enough provisions for AGR dues and has also raised capital for the same. Looks like company is well placed to grow at a healthy rate in upcoming quarters.
Steady Increase in Revenues and EBITDA Margin
Bharti Airtel Ltd rising revenues and EBITDA margin (%)
Bharti Airtel Ltd rising revenues and EBITDA margin (%)

  • The company is increasing its revenue and EBITDA margins consistently over the last few quarters.
  • In last 2 quarters, company was able to expand its margins without significant tariff hikes and mainly on the basis of operational efficiencies.
Increasing Capital Expenditure
Bharti Airtel Ltd capex vs operating free cashflow
Bharti Airtel Ltd CAPEX vs operating free cashflow

  • Company is taking extensive capital expenditure which has increased by 79% YoY, in line with declining operating cash flow.
  • As seen the number of towers has increased to 2.28 lakh towers, which is mainly needed as subscriber base is increasing.
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Healthy growth in India Business
Bharti Airtel Ltd India Business
Bharti Airtel Ltd India Business

  • Company has reported healthy results for its India business with its revenue and operating profits increasing on YoY and QoQ basis.
  • The company’s CAPEX has increased ~2x which has resulted in free cash flow declining by 16% YoY.
Revenue and EBITDA mix
Bharti Airtel Revenue and EBITDA mix
Bharti Airtel Revenue and EBITDA mix

  • Company’s B2C services contribute 75% to the overall revenue mix and remaining is contributed by B2B services.
  • As seen, mobile services has highest revenue and EBITDA contribution, while Digital TV services have highest EBITDA margins.
Customer Base
Bharti Airtel subscriber base
Bharti Airtel subscriber base

  • Company has majority of its subscriber base in India and has shown overall decent growth in subscribers on YoY and QoQ basis.

3. Key Operating metrics

Subscriber Base

Bharti Airtel subscriber base

Bharti Airtel subscriber base

  • The company is increasing its subscriber base every quarter except for June’20 quarter.
  • The company’s prepaid subscriber base is ~94% of the total subscriber base.
Voice on Network
Bharti Airtel Voice on Network and Data Customer Base
Bharti Airtel Voice on Network and Data Customer Base

  • As seen, company has increased its voice as well as data customer base consistently over the last few quarters.
  • With new work from home culture, data, and voice usage of customers is expected to rise.
  • Currently per capita data consumption is at healthy levels of 16.41 and has seen rise from Mar’20 quarter mainly due to lockdown induced work from home.
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Also Watch: Bharti Airtel Ltd Q2FY21 Results Analysis

Conclusion

Thus, company is phenomenal in increasing its revenue, operating efficiency due to robust increase in average revenue per user.

Company has also taken extensive capital expenditure which is expected to convert into healthy revenues going forward.

Thus, it seems the company is well placed to tap on the robust growth in telecom sector and hence should be on investor’s watchlist.


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