Sharekhan has maintained its Buy rating on Bharti Airtel.
A report released on October 31 said: "Bharti Airtel’s Q2FY2009 results are in line with our estimates, though a foreign exchange (forex) loss during the quarter marred the bottom line growth. The consolidated revenues of Bharti Airtel grew by 6.3% quarter on quarter (qoq) and by 42.3% year on year (yoy) to Rs 9,020.3 crore in Q2FY2009. The revenues of the mobile business grew by 5.3% qoq whereas the revenues of the non-mobile business grew by 10.27% qoq.
"At the operating level, the operating profit margin declined by 50 basis points qoq to 41% from 41.5% in the previous quarter. The earnings before interest, tax, depreciation and amortisation (EBIDTA) margin contracted on account of a 16.8% sequential increase in the network operating cost to Rs 1,439.2 crore mainly due to penetration in rural areas. The operating profit stood at Rs3,699.3 crore, that is a growth of 5% on a quarterly basis.
"The net profit grew by a mere 1.1% qoq and by 26.8% yoy to Rs 2,046.3 crore due to a derivative and forex fluctuation loss of Rs 586.2 crore and a sequential increase in the depreciation charge by 15% to Rs 1,154.9 crore.
"In terms of operational highlights of the mobile business, the average realisation
per user (ARPU) declined by 5.4% qoq to Rs 331. However, the total minutes of usage marked a growth of 10.1% qoq to 11,583 crore minutes. In the non-mobile business, the ARPU increased by 0.8% to Rs 1,147.
"Bharti Airtel added 8.1 million subscribers during the quarter, taking its subscriber
base and overall market share to 77.48 million and 24.8%, respectively. The company has recently launched its direct-to-home services in 62 cities. It was also allocated spectrums in Tamil Nadu, Bihar and Karnataka during the quarter.
"We believe that the growth momentum in the company’s business would continue and the company will comfortably achieve our estimates.
"At the current market price, the stock is trading at 11.9x its FY2010E earnings and at an enterprise value/EBIDTA of 7.5x. We maintain our Buy recommendation on the stock and will review our price target in a detailed update shortly."