Bharti Airtel - Q4FY12 Result update - Centrum ... - all-mail-archive

Bharti Airtel - Q4FY12 Result update - Centrum ... - all-mail-archive



Bharti Airtel

Q4FY12 Result update/Estimate change 03 May 2012

Minutes of Usage above estimates

Bharti Airtel’s Q4FY12 results were in line with our estimates on operational

parameters. While revenue was up 1.4% QoQ at Rs187.3bn, EBITDA at

Rs62.2bn was 3.2% above our estimates. Minutes of Usage (MoU) was up 5%

QoQ to 230bn min, above our estimates as the company tweaked tariffs

during Q4. Operating margin was higher at 33.2% due to lower SG&A

expenses. Africa business showed steady improvement with 102bps margin

expansion to 27.8%. While we retain our rating and estimates, we are

adjusting the target price to Rs372 per share factoring in regulatory risks

going forward.

Results in line with expectation operationally: Q4 result came in line with

expectations. Revenue grew by 1.4% to Rs187.3bn driven by growth in MoU.

While the revenue assumption was in line, MoU growth of 5% QoQ was higher

than our estimates. The company witnessed resurgence in minutes on the

back of 1.7% decline in revenue per minutes (RPM). This indicates that Indian

market is price sensitive and has a preference for established players in a

competitive pricing scenario. EBITDA margin expanded 155bp to 33.2%

during Q4 on lower SG&A expenses.

Africa business registers steady improvement in margin: The Africa

business showed steady performance during Q4 with revenue growth of 1.3%

QoQ in dollar terms and 0.6% QoQ in rupee terms. Operating margin

expanded by 102bp to 27.8%. One-off events in Nigeria hampered growth

during Q4. The management indicated that the trend was positive and

expected growth momentum to pick up and revenue market share gain to

accelerate across countries with the launch of 3G and Airtel Money in most


Y/E Mar (Rsmn) Q4FY12 Q4FY11 YoY (%) Q3FY12 QoQ (%) Q4FY12E Var (%)

Net Sales 187,294 162,654 15.1 184,767 1.4 187,457 (0.1)

EBITDA 62,235 54,442 14.3 59,272 5.0 60,312 3.2

EBITDA margin (%) 33.2 33.5 (24) bp 32.1 155 bp 32.2 105 bp

Reported PAT 10,059 14,007 (28.2) 10,112 (0.5) 10,464 (3.9)

Rep PAT margin (%) 5.4 8.6 (324) bp 5.5 (10) bp 8.4 (306) bp

Source: Company, Centrum Research

Con Call highlights: 1) The management indicated a capex of US$3.2bn for

FY13; 2) Enterprise segment – it expects to improve EBITDA margin to 20%+

from 18% levels in FY12; 3) it said flat performance in passive infrastructure

segment was due to write off of STel account and 4) it believed African

countries will see stable tariff scenario in FY13.

Regulatory risk at its peak, maintain Buy: Regulatory uncertainty increased

with recent TRAI recommendation on spectrum pricing which indicates much

higher spectrum payout and risk of spectrum re-farming which would lead to

increase in capex for players to maintain quality. Also, the New Telecom Policy

2012 may see abolition of roaming charges which can hamper profitability.

Given the scenario, we believe that Bharti should be preferred considering its

strong balance sheet and its diversified revenue stream. At the CMP, the stock

trades at 13.8x FY14E EPS, 5.2x EV/EBITDA. We maintain Buy on the stock with

a revised price target of Rs372 (earlier: Rs438), implying 6x FY14E EV/EBITDA.

Our main reason for reduction in price target stems from higher regulatory risk

which translated into the present value of Rs73 per share considering higher

spectrum payouts and related capex and also due to the industry entering

lower growth phase with relatively higher competitive pressure. Risk to our

estimates would be hike in tariff in India resulting in more than expected

increase in RPM.

Key Data

Recco (Prev) Buy (Buy) Bloomberg Code BHARTI IN

Target (Prev) Rs372 (Rs438) Reuters Code Bharti.BO

CMP Rs318* Current Shares O/S (mn) 3,797.6

Upside (%) 17.1% Diluted Shares O/S(mn) 3,797.6

Mkt Cap (Rsbn/USDbn) 1207.4/22.7

Price Performance (%) 52 Wk H / L (Rs) 448/289

1M 6M 1Yr Daily Vol. (3M NSE Avg.) 5,438,200

Bharti Airtel (5.6) (19.2) (15.1) Face Value (Rs) 5

NIFTY (2.9) (1.2) (6.5) USD = Rs53.3

*as on 02 May 2012

Source: Bloomberg, Centrum Research

Analysis of Africa business

(Rs ) Q4FY12 Q4FY11 Q3FY12 YoY (%) QoQ (%)

Subscribers (mn) 53.1 44.2 50.9 20.2 4.3

MoU/Sub (min.) 122 115 125 5.6 (2.1)

RPM (US¢) 5.60 6.19 5.72 (9.6) (2.0)

ARPU (US$) 6.83 7.16 7.12 (4.6) (4.1)

Minutes of Usage (mn min.) 19,131 14,915 18,496 28.3 3.4

Revenue (Rsmn) 53,874 41,815 53,577 28.8 0.6

EBITDA (Rsmn) 14,983 10,157 14,351 47.5 4.4

OPM (%) 27.8 24.3 26.8 352 bp 103 bp

Source: Company, Centrum Research

Minutes of usage bounced back in Q4









12.8 10.2




173 190 191 199 212 222 217 219 230





Minutes (bn)

Source: Company, Centrum Research








QoQ growth(%)

Bharti’s financials summary (Ex-Africa business)








(Rs mn) Q4FY12 Q4FY11 Q3FY12 YoY (%) QoQ (%)

Revenue 133,420 120,839 131,190 10.4 1.7

EBITDA 47,252 44,285 44,921 6.7 5.2

Margin (%) 35.4 36.6 34.2 (123) bp 117 bp

ARPU (Rs) 189 194 187 (2.4) 1.0

MOU/Sub (in min.) 431 449 419 (3.9) 2.8

RPM (Rs) 0.44 0.43 0.45 1.5 (1.7)

Source: Centrum Research

Abhishek Anand

+91 22 4215 9853

Y/E Mar (Rsbn) Rev YoY (%) EBITDA EBITDA (%) Adj PAT YoY (%) Fully DEPS RoE (%) RoCE (%) P/E (x) EV/EBITDA (x)

FY11 594,672 42.1 199,664 33.6 62,987 (29.7) 16.6 14.0 10.2 19.2 9.0

FY12 714,508 20.2 236,574 33.1 43,394 (31.1) 11.4 8.7 6.0 27.8 7.8

FY13E 803,650 12.5 277,004 34.5 66,452 53.1 17.4 12.3 7.7 18.2 6.4

FY14E 852,045 6.0 313,970 36.8 87,527 31.7 23.0 14.3 9.4 13.8 5.2

FY15E 896,481 5.2 336,035 37.5 102,616 17.2 26.9 14.6 10.8 11.8 4.5

Source: Company, Centrum Research Estimates

Please refer to important disclosures/disclaimers inside

Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Financials (Consolidated)

Exhibit 1: Income Statement

Y/E March (Rsmn) FY11 FY12 FY13E FY14E FY15E

Revenue 594,672 714,508 803,650 852,045 896,481

YoY growth (%) 42.1 20.2 12.5 6.0 5.2

Access charges 74,718 97,848 107,214 107,854 111,465

% of Sales 12.6 13.7 13.3 12.7 12.4

License and spectrum charges 52,600 60,612 65,099 68,638 71,390

% of Sales 8.8 8.5 8.1 8.1 8.0

Network operations cost 127,163 157,596 176,986 181,750 193,557

% of Sales 21.4 22.1 22.0 21.3 21.6

Personnel expenses 32,784 36,122 38,886 39,731 40,884

% of Sales 5.5 5.1 4.8 4.7 4.6

Mktg, Distn, Admin & other exp. 107,743 125,756 138,461 140,101 143,149

% of Sales 18.1 17.6 17.2 16.4 16.0

EBITDA 199,664 236,574 277,004 313,970 336,035

EBITDA Margin 33.6 33.1 34.5 36.8 37.5

Depreciation 102,066 133,681 142,617 153,214 161,496

PBIT 97,598 102,893 134,387 160,756 174,540

Interest expenses 25,349 38,185 36,581 31,075 23,100

Share of profits / (losses) in JVs

and associates (57) (74) - - 1,608

PBT from operations 72,192 64,634 97,805 129,681 153,048

Other non operating income 4,590 550 800 800 800

PBT before extra-ordinary items 76,782 65,184 98,605 130,481 153,848

Extra-ordinary income/ (exps.) 12,681 2,390 - - -

PBT 89,463 67,574 98,605 130,481 153,848

Provision for tax 17,790 22,602 31,554 41,754 49,231

Effective tax rate 19.9 33.4 32.0 32.0 32.0

Minority Interest (1,475) (13) 600 1,200 2,000

PAT (adjusted) 62,987 43,394 66,452 87,527 102,616

YoY growth (%) (29.7) (31.1) 53.1 31.7 17.2

PAT margin 10.6 6.1 8.3 10.3 11.4

Source: Company, Centrum Research Estimates

Exhibit 2: Balance Sheet

Y/E March (Rsmn) FY11 FY12 FY13E FY14E FY15E

Share Capital 18,988 18,988 19,047 19,055 19,055

Reserves 468,680 487,125 551,438 636,238 735,650

Net worth 487,668 506,113 570,486 655,293 754,704

Debt 616,708 690,232 640,000 490,000 350,000

Minority Interest 28,563 27,695 28,295 29,495 31,495

Deferred Tax Liability (32,574) (39,656) (39,656) (39,656) (39,656)

Total Capital Employed 1,100,365 1,184,384 1,199,125 1,135,132 1,096,543

Fixed Assets 1,288,743 1,335,820 1,350,494 1,277,526 1,186,213

Investments 6,224 18,958 14,631 16,631 93,462

Inventories 2,139 1,308 4,950 4,944 4,991

Debtors 54,929 63,735 64,448 68,156 68,309

Cash and cash equivalent 9,575 20,300 35,678 37,522 23,096

Loans and Advances & others 39,210 43,807 59,539 63,185 66,852

Total current assets 105,853 129,150 164,616 173,808 163,248

Current liabilities and provisions 285,475 295,795 326,678 328,698 342,039

Net current assets (179,622) (166,645) (162,063) (154,890) (178,791)

Other non-current assets 19,183 35,410 37,181 39,040 40,992

Other non-current liabilities 34,163 39,160 41,118 43,174 45,333

Total Assets 1,100,365 1,184,384 1,199,125 1,135,132 1,096,543

Source: Company, Centrum Research Estimates

Exhibit 3: Cash flow

Y/E March (Rsmn) FY11 FY12 FY13E FY14E FY15E

Cash flow from operating

Profit before tax 94,572 58,332 98,005 129,281 151,848

Depreciation 102,066 133,681 142,617 153,214 161,496

Other 2,971 74 (200) 400 (408)

Interest expenses 25,349 38,185 36,581 31,075 23,100

Cash before WC change 224,958 230,272 277,004 313,970 336,035

Working capital adjustment 8,203 15,263 (40,712) 535 13,431

Cash flow from operations 233,161 245,535 236,292 314,505 349,466

Direct taxes paid 17,790 22,602 31,554 41,754 49,231

Cash from operations 215,371 222,933 204,738 272,751 300,235

Cash flow from investing

Capex (649,541) (172,786) (93,239) (85,912) (146,764)

Invest & income for invest 46,590 (10,823) 5,127 (1,200) (1,592)

Cash flow from investing (602,951) (183,609) (88,112) (87,112) (148,356)

Cash flow from financing

Proceeds from sh cap & premium (306) (357) 59 7 -

Borrowings/ (Repayments) 423,312 (2,830) (50,232) (150,000) (140,000)

Interest paid (25,349) (38,185) (36,581) (31,075) (23,100)

Dividend paid (4,428) (4,568) (2,138) (2,727) (3,205)

Cash flow from financing 393,229 (45,940) (88,892) (183,794) (166,305)

Net cash increase/ (decrease) 5,649 (6,616) 27,734 1,844 (14,426)

Free cash flow to firm (FCFF) (447,288) 46,557 100,593 177,695 148,409

FCFF per share (117.8) 12.3 26.4 46.6 38.9

Source: Company, Centrum Research Estimates

Exhibit 4: Key Ratios

Y/E March FY11 FY12 FY13E FY14E FY15E

Margin Ratios (%)

EBITDA Margin 33.6 33.1 34.5 36.8 37.5

PBIT Margin 16.4 14.4 16.7 18.9 19.5

PBT Margin 12.9 9.1 12.3 15.3 17.2

PAT Margin 10.6 6.1 8.3 10.3 11.4

Return Ratios (%)

ROCE 10.2 6.0 7.7 9.4 10.8

ROIC 10.4 6.1 7.9 9.8 11.2

ROE 14.0 8.7 12.3 14.3 14.6

Turnover Ratios

Assets Turover Ratio (x) 0.75 0.63 0.68 0.73 0.81

Average collection period (days) 72.5 75.7 78.6 78.2 76.0

Average payment period (days) 287.7 243.3 224.0 224.9 227.7

Inventory holding (days) 1.3 0.7 2.2 2.1 2.0

Per share (Rs)

Basic EPS 19.3 11.9 17.5 23.1 27.0

Fully diluted EPS 16.6 11.4 17.4 23.0 26.9

CEPS 43.5 46.6 54.9 63.2 69.3

Book Value 128.4 133.3 149.8 172.0 198.0

Solvency ratios

Debt/ Equity 1.2 1.3 1.1 0.7 0.4

Interest Coverage 3.9 2.7 3.7 5.2 7.6

Valuation parameters (x)

P/E 19.2 27.8 18.2 13.8 11.8

P/BV 2.5 2.4 2.1 1.8 1.6

EV/ EBITDA 9.0 7.8 6.4 5.2 4.5

EV/ Sales 3.0 2.6 2.2 1.9 1.7

M-Cap/ Sales 2.0 1.7 1.5 1.4 1.4

Source: Company, Centrum Research Estimates


Bharti Airtel

Appendix A


Centrum Broking Limited (“Centrum”) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and National Stock Exchange of India Ltd. (NSE). Our

holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As a group Centrum has Investment Banking, Advisory and other business relationships

with a significant percentage of the companies covered by our Research Group. Our research professionals provide important inputs into the Group's Investment Banking and other

business selection processes.

Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other businesses and may receive commission,

brokerage, fees or other compensation from the company or companies that are the subject of this material/report. Our Company and Group companies and their officers, directors and

employees, including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have

"long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates do not own 1% or more in the

equity of this company Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions

that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations

expressed herein. We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in

this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We and our Group

may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of Centrum.

Centrum or its affiliates do not make a market in the security of the company for which this report or any report was written. Further, Centrum or its affiliates did not make a market in the

subject company’s securities at the time that the research report was published.

This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any

securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document

does not solicit any action based on the material contained herein. It is for the general information of the clients of Centrum. Though disseminated to clients simultaneously, not all clients

may receive this report at the same time. Centrum will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into

account the particular investment objectives, financial situations, or needs of individual clients. Similarly, this document does not have regard to the specific investment objectives,

financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all

investors. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in this report are

organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. The appropriateness of a particular investment or strategy will

depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/

her/their particular circumstances and, if necessary, seek professional/financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis of

the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document.

The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies.

Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not

materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by

the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally

accented accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the

inclusion of the projections and forecasts described herein as a representation or warranty by or on behalf of the Company, Centrum, the authors of this report or any other person that

these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after

carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts.

The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments.

Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth

in projections. Forward-looking statements are not predictions and may be subject to change without notice. Centrum does not provide tax advice to its clients, and all investors are

strongly advised to consult regarding any potential investment. Centrum and its affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report.

Foreign currencies denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment.

In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk. Certain transactions including those involving

futures, options, and other derivatives as well as non-investment-grade securities give rise to substantial risk and are not suitable for all investors. Please ensure that you have read and

understood the current risk disclosure documents before entering into any derivative transactions.

This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or

implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its

accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when

opinions or information in this report change.

This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible media and should not be

reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the

public media without the express written consent of Centrum. This report or any portion hereof may not be printed, sold or distributed without the written consent of Centrum.

This report has not been prepared by Centrum Securities LLC. However, Centrum Securities LLC has reviewed the report and, in so far as it includes current or historical information, it is

believed to be reliable, although its accuracy and completeness cannot be guaranteed.

The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe,

any such restrictions. Neither Centrum nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or

consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained herein shall form the

basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your information, may not be distributed to the press or

other media and may not be reproduced or redistributed to any other person. The distribution of this report in other jurisdictions may be restricted by law and persons into whose

possession this report comes should inform themselves about, and observe any such restrictions. By accepting this report, you agree to be bound by the fore going limitations. No

representation is made that this report is accurate or complete.

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Centrum Broking and are given as of this date and

are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events

will be consistent with any such opinions, estimate or projection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person.

Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections

contained herein are entirely those of the authors. None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this

document or its contents or otherwise arising in connection therewith.

Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. Centrum and affiliates have not received

compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for service in respect of public offerings, corporate

finance, debt restructuring, investment banking or other advisory services in a merger/acquisition or some other sort of specific transaction.

As per the declaration given by him, Mr Abhishek Anand, research analyst and the author of this report and/or any of his family members do not serve as an officer, director or any way

connected to the company/companies mentioned in this report. Further, as declared by him, he have not received any compensation from the above companies in the preceding twelve

months. Our entire research professionals are our employees and are paid a salary. They do not have any other material conflict of interest of the research analyst or member of which

the research analyst knows of has reason to know at the time of publication of the research report or at the time of the public appearance.

While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are under no obligation to update

or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Centrum from doing so.

Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or Centrum

policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances

Key to Centrum Investment Rankings

Buy: Expected outperform Nifty by>15%, Accumulate: Expected to outperform Nifty by +5 to 15%, Hold: Expected to outperform Nifty by -5% to +5%, Reduce: Expected to underperform

Nifty by 5 to 15%, Sell: Expected to underperform Nifty by>15%


Bharti Airtel

Centrum Broking Limited

Member (NSE, BSE, MCX-SX), Depository Participant (CDSL) and SEBI registered Portfolio Manager

Registration Nos.





MCX – SX (Currency Derivative segment) REGN. NO.: INE261454236


Investor Grievance Email ID:

Compliance Officer Details :

Mr. Praveen Malik; Tel: (022) 42159703; Email ID:

Registered Office Address

Bombay Mutual Building ,2nd Floor, Dr. D. N. Road,

Fort, Mumbai - 400 001

Correspondence Address

Centrum House

6th Floor, CST Road, Near Vidya Nagari Marg, Kalina,

Santacruz (E), Mumbai 400 098.

Tel: (022) 4215 9000


Bharti Airtel

More magazines by this user
Similar magazines