BHARTI AIRTEL

STOCK PITCH

Recommendation - Buy
By :
Varun Acharya – 23P122
(Induction number – PG090)
 Company Overview
Digital Services
 Global communications provider with 491M+ customers Geographic and business segment-wise revenue breakdown [3]
 Geographical presence across 17 countries in South Asia and Africa
 Ranks among top 3 mobile operators in the world
 India’s largest integrated communications solutions provider
 2nd largest mobile operator in Africa

Company strategy[1] Key Business

Segments:
1) Mobile
services Market analysis[6]
2) Homes
services
3) Digital TV Geographic breakup Segment breakup
services
4) Airtel
Business

Geographic presence[2]
Corporate Governance
Market capture in wireless segment[7]

Board composition [4] Shareholding pattern [5]

 VALUATION

With Listed Peers [8]

On Mobile
Name Bharti Airtel Tata Comm Vodafone Idea Tata Tele Meh Railtel MTNL 1) Sales growth gives a good metric since sales for any company
Global
is always positive and a trend can be identified
Profitability 2) Operating profit margin over net profit margin is a better
Sales metric as NPM is mostly negative since many of the
19.39 8.07 9.51 3.02 26.92 -18.61 1.08
growth % companies have pending AGR dues
OPM % 51.22 23.31 39.72 45.11 16.9 -47.67 2.38 3) ROCE is a better metric than ROE since ROCE uses a before
ROE % 12.05 141.54 12 1.47 tax measure in the numerator whereas ROW uses net profit

ROCE % 13.53 23.96 39.83 16.34 -7.17 1.95

1) P/E is not a good metric because earnings is negative for
Valuation ratios
these companies as they also face AGR dues.
P/E 59.84 32.19 29.03 83.55 2) Price to Book value is a good measure as the telecom
CMP / BV 6.43 33.26 3.08 1.23 industry is an asset-heavy sector with large PPEs
3) PEG ratio is not helpful since P/E is negative
PEG 1.26 1.58 7.44 -24.01 4) Price to sales is a better metric than earnings since sales are
CMP / Sales 3.73 2.76 0.96 13.65 2.47 1.31 1.53 positive and it is less subject manipulation by management
5) EV/EBITDA is a relevant metric since the telecom industry is
EV / EBITDA 10.04 12.66 5.24 64.96 12.33 173.42 31.53 a highly leveraged industry and EV/EBITDA is independent
Sector-specific data of the capital structure
1. ARPU [9] 2. Number of subscribers [10]
ARPU – The
Represents the
average
total number of
revenue per
subscribers and
user (ARPU)
gives an idea
measures the
about the number
average
of new customers
revenue a
it adds over time
company
generates per
user over a
given time.
 Investment Rationale for Buy call
Technical factors: Fundamental factors:
1) Qualitative factors:
1) Strong management with a good strength of independent directors, thus potentially avoiding principal-agent conflict
between shareholders and managers
2) Increased ownership by institutional investors is a bullish signal.
3) Greater focus and push on digitization in India presents a huge market growth
4) Airtel took the lead in 5G by testing the network ahead of the competition and became the first operator in India to
demonstrate a 5G cloud gaming experience and conduct a successful 700 Mhz band trial for rural connectivity.
5) Initiated dividend in August 2022, after a period of three years. Dividend initiations are usually seen as a positive sign
6) Strong market capture in South Asia and Africa
7) Increased focus on CSR initiatives and ESG activities particularly aiming at reducing the carbon footprint
8) Mobile number portability churn rate rising year on year.

2) Quantitative factors:

1) Highest ARPU among all competitors and a growing trend YoY

2) Increased subscriber base month on month
3) Airtel outperformed competitors in expanding revenue market share through incremental 4G net-adds, adding 21.5 Mn in the year
to cross the 200 Mn 4G smartphone customer threshold
4) High sales growth, Operating profit margins and ROCE as compared to peers
5) EV/EBITDA ratio is far less than its peers which suggests undervaluation

The price of 895.1 represents a resistance zone

as the candle had reverted after reaching this
price previously.
The candle has recently broken out of the
resistance zone and there is a potential upside
in the short run.
References

[1]https://www.bseindia.com/bseplus/AnnualReport/532454/73851532454.pdf - Page 31
[2]https://www.datacenterdynamics.com/en/news/airtel-launches-new-green-data-center-in-mumbai/
[3]https://www.bseindia.com/bseplus/AnnualReport/532454/73851532454.pdf – Page 167
[4]https://www.bseindia.com/bseplus/AnnualReport/532454/73851532454.pdf – Page 128
[5]https://www.screener.in/company/BHARTIARTL/consolidated/#shareholding
[6]TRAI data
[7] https://www.trai.gov.in/sites/default/files/PR_No.05of2023_0.pdf - Page 7
[8] https://www.screener.in/company/BHARTIARTL/consolidated/#peers
[9]
https://telecom.economictimes.indiatimes.com/news/industry/telcos-take-tough-calls-to-improve-arpu/100368643#:~:text=Both%20Bharti%20Airtel%20and%20Jio,178
.2%20in%20the%20previous%20quarter
.
[10] https://www.livemint.com/industry/telecom/jio-airtel-add-35-lakh-new-subscribers-vi-loses-29-lakh-subscribers-in-april-trai-11687968554549.html