9 December 2020
Company Update | Sector: Telecom
TP: INR650 (+29%)
Earnings outlook steady; price hike likely soon
Gaining competitive ground
The swift ~20% recovery in the stock after the recent fall has triggered
deliberations on its earnings outlook, the possibility of a tariff hike, and capex
intensity. Based on our recent channel checks, we note that:
BHARTI's earnings outlook remains strong, given the steady 4G subscriber
additions, which are likely to see 2-3% QoQ ARPU growth, and strong EBITDA
A price hike, which looked uncertain in the last 6-9 months, has now started
to look imminent with the weakening of industry subscriber growth.
Our recent interactions with industry experts indicate a potential price hike
of 15-20% in the next two months. Competitive pricing in postpaid and FTTH
segment by peers have had a limited impact on earnings.
Capex could reduce by ~15% in FY21E. Spectrum auction, which could entail
investments of INR130b, looks unlikely to happen by 4QFY21E.
We continue to remain bullish on BHARTI (with a TP of INR650), given its
strong earnings outlook, potential tariff hikes soon, well-capitalized Balance
Sheet, potential FCF generation, and strong competitive position.
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
2744.4 / 37.3
612 / 381
Financials & Valuations (INR b)
FY20 FY21E FY22E
875.4 1,012.5 1,058.4
366.1 464.6 545.6
EBIT Margin (%)
Adj. EPS (INR)
EPS Gr. (%)
-14.6 -123.5 153.9
141.4 114.7 119.2
NM 289.6 114.1
Div. Yield (%)
Shareholding pattern (%)
Sep-20 Jun-20 Sep-19
FII Includes depository receipts
Stock Performance (1-year)
See India wireless revenue/EBITDA QoQ growth steady at 2-3%/4-
4G subscriber additions to remain healthy:
Our channel checks
indicate that BHARTI continues to gain competitive ground, adding
strong 4G subscribers in the festive season, after the recent healthy
additions in 2QFY21. The company should be able to maintain its 35-
40% incremental 4G subscriber market share. This would turn out to be
3-4m monthly 4G subscriber additions in 3QFY21E.
ARPU to grow through mix benefit:
In line with the last two quarters
(1Q and 2QFY21), we expect an improvement in the subscriber mix to
generate ~2% ARPU growth.
Our channel checks indicate that BHARTI saw a limited impact from the
recently launched competitive postpaid tariffs by its peers, given the
sticky nature of its customer profile and follow-up price cuts in FTTH.
IDEA’s recent INR50 tariff rise could support industry tariff hikes.
Price hike on the anvil
A price hike, which looked uncertain in the last 6-9 months due to the
challenging economic scenario, has started to look imminent with
weakening subscriber growth across players. Our recent interactions
with industry experts indicate a potential price hike of 15-20% in the
next two months.
Research Analyst: Aliasgar Shakir(Aliasgar.Shakir@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
3 September 2019
Investors are advised to refer through important disclosures made at the last page of the Research Report.