Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti Airtel (BHARTI IN) Rating:4
2Q FY11 results: no turnaround in sight
What has changed?
• Bharti Airtel’s (Bharti) 2Q FY11 results were marginally below our forecasts.
Impact
• The results. The 2Q FY11 net profit of Rs16.6bn was 4% below our forecast,
although consolidated revenue and EBITDA were in line with our expectations.
• South-Asia operations. Even though the company added 6.6m subscribers in
2Q FY11 for its South Asia division, the revenue for this unit was flat on a
quarter-on-quarter basis. The lacklustre revenue performance was due to a 6%
QoQ drop in the average revenue per user (ARPU), which was the result of both
weak tariffs (down 1% QoQ) and a fall in average minutes of usage per
subscriber (down 5% QoQ). The revenue trend for the division for 2Q FY11
was, meanwhile, similar to that of rivals Idea Cellular (IDEA IN, Rs69.85, 4)
and Vodafone India (Not rated).
points quarter-on-quarter, was weaker than we forecast due to higher-thanexpected
access charges, as well as sales and marketing costs. On a normalised
basis, 2Q FY11 revenue increased by a robust 4% QoQ, driven by a healthy
3.7m increase in subscribers in the quarter. The ARPU for 2Q FY11 was stable
compared with 1Q FY11, at US$7.4, which was positive given the price cuts
during the quarter. The stable ARPU profile for 2Q FY11 was in line with the
trend seen at rival MTN (Not rated).
Valuation
• Our six-month target price of Rs265 is based on a sum-of-the-parts valuation
using a DCF methodology. We maintain our 4 (Underperform) rating.
Catalysts and action
• We believe the lacklustre revenue trend in India underscores the negative
effects of fierce competition, and that the turnaround in the Africa operation is
still some time off. In Africa, we believe Bharti needs to rein in costs, even
though we regard the 2Q FY11 revenue performance as somewhat encouraging.
No comments:
Post a Comment