Bharti Airtel’s 164% profit surge fails to cheer D-Street on 5g spectrum base price jitters

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Shares of Bharti Airtel slipped back into negative territory on Wednesday, a day after the phone company announced it had more than doubled its profit for the January-March 2022 quarter thanks to tariff hikes.

The stock’s downward move could be due to the Digital Communications Commission (DCC) moving ahead with the 5G spectrum auction base price suggested by the Telecoms Regulatory Authority of India. India (Trai).

Shares of Bharti Airtel jumped 2.8% in early trades but reversed shortly after. At 12:55 p.m., the stock was trading at Rs 692.25, down 2.1% from its previous close on BSE.

The Telecoms Ministry is likely to forward the 5G spectrum auction proposal to the Union cabinet for final approval next week, an official source told PTI on Tuesday. “The DCC has confirmed its view. It is not a decision-making body. It will make recommendations to Cabinet for final approval of the auction plan. There is no change in the base price recommended by Trai,” the official said.

Telecom operators objected to Trai’s recommended base price. In April, Airtel urged the government not to charge high fees for allocating 5G spectrum, saying faster rollout of the next-generation telecom network may have more benefits than raising cost revenue. initial.

Ajit Mishra, VP of Research, Religare Broking Ltd, said telecom operators were hoping for some breathing room in the base 5G auction price calculation to make it more economically viable. “However, there appears to be no major change in the base price. Today’s move at Bharti Airtel is largely due to earnings, which came after market hours on Tuesday” , he told CNBCTV18.com.

Meanwhile, after the telecom operator’s 164% jump in net profit year-on-year (YoY) to Rs 2007.9 crore beat Street’s expectations, brokerages recommended buying the shares telecommunications operator because they see more than 25% increase.

Investors were initially positive as the telecom operator’s quarterly revenue rose 22.3% to Rs 31,500 crore in the January-March quarter, while ARPU (Average Revenue per user) rose to 178 rupees from 145 rupees in the previous financial year, thanks to a healthy flow. thanks to price increases and strong acquisitions of 4G customers.

According to the telecom operator, its ARPU continues to be the best in the industry, with average data usage per data customer of 18.8 GB per month and voice usage per customer of 1,083 minutes per month.

Here’s what brokers have to say

Recommendation Target price
CLSA To buy Rs 953
Jefferies To buy Rs 880
nomura To buy Rs 850
JP Morgan Overweight Rs 900

Jefferies is expecting a growth of 24.3% from the May 17 closing price of Rs 707.55. Jefferies has lowered its EBITDA estimates by 1-2% due to higher diesel prices and expects the telecommunications company to achieve an EBITDA CAGR of 20% in FY22 -25. Nomura sees a 20% upside from Tuesday’s close.

Balaji Subramanian, Vice President, IIFL Securities, said Bharti Airtel’s revenue market share gains are expected to continue on strong execution and ARPU tailwinds. He said 5G spectrum auctions needed to be watched. The trend of smartphone shipments for the industry as a whole should also be watched, given the continued shortages of chips.

Market expert Ajay Bodke also remained constructive on telecom operators. He said, looking at the rate increases over the past 12 months, there’s a clear and healthy flow in ARPUs. He said home businesses and businesses are doing well, but for two weak spots – DTH business and Africa business. “I expect an EBITDA CAGR of around 20% from 22 to 25 for Bharti. I think that should be part of the core portfolio,” Bodke said.

First post: STI

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