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Africa foray continues to hurt; India saves yet another quarter. Bharti reported broadly in-line revenues and EBITDA for 3QFY15 despite another quarter of sharp miss on Africa financials. Africa remains a story of constant misses on progressively lower expectations. Poor Africa performance coupled with the crude-led pressure on several African economies will likely drive another round of massive cuts in Africa estimates. India wireless and DTH continue to be the two bright spots. Even as inexpensive valuations bake in the obvious (Africa) and the potential (spectrum/ R-Jio) negatives, Bharti’s 3QFY15 once again lends weight to the case for Idea as a better pick.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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3QFY15 – in-line overall; India does well, international disappoints again Bharti’s quarterly earnings, for the nth time in the past n quarters, was a story of two halves – robust India performance and weak international (Africa and South Asia). On an overall basis, Bharti’s 3QFY15 revenues and EBITDA of `232 bn (+5.8% yoy) and `77.8 bn (+9.7% yoy) were broadly in line with our expectations. Lower-than-expected depreciation and net finance costs drove a 54% outperformance at the recurring PAT level – `17.3 bn reported (+108% yoy) versus `11.23 bn expected; however, we would not read much into this outperformance. Consolidated EBITDA margin was 33.5% for 3QFY15, up 30 bps qoq and 120 bps yoy. Africa performance weakens and could remain weak for a while Weak Africa financials were the key disappointment in Bharti’s 3QFY15 earnings report. US$ revenues came in at US$1.1 bn (down 3.3% qoq and 5.3% yoy). Adjusted for US$ appreciation, constant-currency growth was still a weak 1.4% qoq and 3.3% yoy – currency pressure was not the key reason for weak performance. Africa EBITDA margins declined a sharp 390 bps yoy and 180 bps qoq to a new post-acquisition low of 21.9% while absolute EBITDA declined 11% qoq and 20% yoy to US$240 mn, close to levels immediately post acquisition. Sharp EBITDA margin decline is another factor that negates the ‘it was only currency pressure’ theory; bulk of the costs, like revenues, are in local currency and hence currency movements should not impact margins materially. In a nutshell, there is little to show for 4+ years of post-acquisition turnaround efforts in Africa, except for pressure on consolidated financials and stock price. MD&A in the quarterly report has a word of caution on oil-crash-led economic growth challenges in several economies in Africa; while the MD&A is silent on the impact of these growth challenges on the wireless industry and/or Bharti, it is safe to assume that expected subdued economic growth will likely only prolong the phase of weak performance. We expect another round of sharp cuts in Africa estimates; we shall review our estimates after the earnings call on Thursday.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05022015pu.pdf
Africa foray continues to hurt; India saves yet another quarter. Bharti reported broadly in-line revenues and EBITDA for 3QFY15 despite another quarter of sharp miss on Africa financials. Africa remains a story of constant misses on progressively lower expectations. Poor Africa performance coupled with the crude-led pressure on several African economies will likely drive another round of massive cuts in Africa estimates. India wireless and DTH continue to be the two bright spots. Even as inexpensive valuations bake in the obvious (Africa) and the potential (spectrum/ R-Jio) negatives, Bharti’s 3QFY15 once again lends weight to the case for Idea as a better pick.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
3QFY15 – in-line overall; India does well, international disappoints again Bharti’s quarterly earnings, for the nth time in the past n quarters, was a story of two halves – robust India performance and weak international (Africa and South Asia). On an overall basis, Bharti’s 3QFY15 revenues and EBITDA of `232 bn (+5.8% yoy) and `77.8 bn (+9.7% yoy) were broadly in line with our expectations. Lower-than-expected depreciation and net finance costs drove a 54% outperformance at the recurring PAT level – `17.3 bn reported (+108% yoy) versus `11.23 bn expected; however, we would not read much into this outperformance. Consolidated EBITDA margin was 33.5% for 3QFY15, up 30 bps qoq and 120 bps yoy. Africa performance weakens and could remain weak for a while Weak Africa financials were the key disappointment in Bharti’s 3QFY15 earnings report. US$ revenues came in at US$1.1 bn (down 3.3% qoq and 5.3% yoy). Adjusted for US$ appreciation, constant-currency growth was still a weak 1.4% qoq and 3.3% yoy – currency pressure was not the key reason for weak performance. Africa EBITDA margins declined a sharp 390 bps yoy and 180 bps qoq to a new post-acquisition low of 21.9% while absolute EBITDA declined 11% qoq and 20% yoy to US$240 mn, close to levels immediately post acquisition. Sharp EBITDA margin decline is another factor that negates the ‘it was only currency pressure’ theory; bulk of the costs, like revenues, are in local currency and hence currency movements should not impact margins materially. In a nutshell, there is little to show for 4+ years of post-acquisition turnaround efforts in Africa, except for pressure on consolidated financials and stock price. MD&A in the quarterly report has a word of caution on oil-crash-led economic growth challenges in several economies in Africa; while the MD&A is silent on the impact of these growth challenges on the wireless industry and/or Bharti, it is safe to assume that expected subdued economic growth will likely only prolong the phase of weak performance. We expect another round of sharp cuts in Africa estimates; we shall review our estimates after the earnings call on Thursday.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05022015pu.pdf
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