Bharti Airtel: Disappointing Q1FY13, PAT declines 37% y-o-y
- Bharti reported disappointing 1QFY13 with PAT declining 37% y-o-y and 24% q-o-q to Rs7.6b, significantly below the estimate of Rs10.7b. While India & SA margins eroded sharply on Bharti's increased aggression to protect revenue market share, performance in Africa was hit largely due to adverse macro factors.
- Consolidated revenue of Rs 193.5b (+ 3.3% q-o-q) was 1% above estimate. However EBITDA/PAT were 8/29% below estimates due to 300bp q-o-q EBITDA margin decline. Reported PAT was boosted by Rs1.6b forex gain.
- Revenue for India and South Asia (SA) grew 8.6% y-o-y and 2.2% q-o-q to Rs137.2b (1% above est). EBIDTA declined 8% q-o-q led by 9/6% q-o-q decline in mobile/passive infrastructure segments.
- India and SA operating costs increased 17% y-o-y and 7.7% q-o-q. EBITDA margin decline was largely led by higher SGA (160bp) and network costs (125bp).
- India mobile traffic grew 3.7% q-o-q and mobile RPM declined 2.5% q-o-q to 42.7p; both in line with the estimates. Churn levels remain elevated at ~9% per month.
- Africa EBIDTA declined 8% q-o-q to USD275m (vs est of flat EBITDA) on a 0.4% q-o-q revenue growth (2.7% traffic growth, 3.1% RPM decline). EBITDA margin declined 200bp q-o-q to 25.8%.
- Africa business has been impacted due to higher economic linkages of African economies with Europe, violence in Nigeria/DRC and increased competition in Ghana.
- Consolidated net debt increased by Rs32.5b q-o-q to ~Rs683b. Finance cost declined 22% q-o-q to Rs8.2b as Bharti reported a forex gain of Rs1.6b vs loss of Rs1.8b in 4QFY12.
Outlook: Motilal Oswal downgrades the EBITDA estimates by 10-11% and PAT by 47-48% led by lower margin assumptions. Traffic/revenue growth is likely to be under pressure in 2QFY13 due to seasonality.
Motilal Oswal now expects 8% EBITDA CAGR over FY12-14E. The stock trades at EV/EBITDA of 7.1x FY13E and 6x FY14E. Rating is Under Review.
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