X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bharti Airtel: Forex volatility impacts profits - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Bharti Airtel: Forex volatility impacts profits
Oct 31, 2008

Performance summary
  • Topline (based on Indian GAAP consolidated numbers) grows by 41% YoY during 2QFY09, 43% YoY during 1HFY09. Growth led by a strong 59% YoY rise in the mobile subscriber base, which crossed the 77 m mark by the end of September 2008; adds a record 8.1 m mobile subscribers during the quarter itself.

  • Mobile services revenue grow by 44% YoY during the quarter, aided by a strong 14% YoY rise in minutes of usage. Average revenue per user declines by 8% YoY.

  • Operating margins contract by 1.7% YoY during the quarter owing to higher network operating costs (as percentage of sales), seemingly on the back of higher import costs of network equipments due to rupee’s depreciation against the US dollar.

  • Net profits grow marginally by 1.5% YoY during the quarter, impacted by accounting adjustment for foreign exchange fluctuation on loans and liabilities. Excluding this adjustment, growth in profits stands at 27% YoY.



Consolidated financial performance snapshot (Indian GAAP)
(Rs m) 2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
Sales 63,249 89,236 41.1% 121,985 174,296 42.9%
Expenditure 36,676 53,284 45.3% 71,419 103,659 45.1%
Operating profit (EBDIT) 26,573 35,951 35.3% 50,565 70,637 39.7%
Operating profit margin (%) 42.0% 40.3%   41.5% 40.5%  
Other income 618 292 -52.8% 1,455 907 -37.6%
Interest expense/(income) (78) 10,996   (2,727) 10,050 -468.6%
Depreciation 8,813 11,022 25.1% 16,702 20,993 25.7%
Profit before tax 18,456 14,226 -22.9% 38,045 40,500 6.5%
Minority interest 193 465   380 899  
Tax 1,825 (2,921) -260.1% 6,986 1,254 -82.1%
Profit after tax/(loss) 16,438 16,681 1.5% 30,680 38,348 25.0%
Net profit margin (%) 26.0% 18.7%   25.2% 22.0%  
No. of shares       1,897.9 1,898.1  
Diluted Earnings per share (Rs)*         37.7  
P/E ratio (x)*         16.2  
* On a trailing 12 months basis

What has driven growth in 2QFY09?
  • Bharti’s mobile services business remained the lead growth driver for the company during 2QFY09. This business recorded growth of 44% YoY during the quarter, aided by a strong rise in the subscriber base and average minutes of usage (MoU) per subscriber. While the former grew by 59% YoY, the latter was up 14% YoY. Importantly, Bharti has recorded a consistent rise in its net additions per month over the past two years. On the other hand, the subscribers on Bharti’s network are also talking more. This is indicated by the rise in its average MoU per subscriber per month, which stood at 536 minutes in 2QFY09. This consistency is at a time when Bharti’s competitors (like Reliance Communications) are recording pressure on bother average revenue per user (ARPU) and average MoU.At the end of September 2008, Bharti held 24.6% of India’s mobile services market (in terms of subscribers) and has a 28.5% share of incremental additions.

    Segment-wise performance*
      2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
    Mobile Services            
    Revenue (Rs m) 50,840 72,994 43.6% 97,876 142,199 45.3%
    % of total revenues 71.1% 63.6%   71.2% 71.2%  
    Minutes billed (m) 64,375 115,834 79.9% 121,500 221,051 81.9%
    Revenue per minute (Rs) 0.79 0.63 -20.2% 0.81 0.64 -20.1%
    EBIT margin 27.3% 21.8%   27.6% 22.1%  
    EBIT per minute (Rs) 0.22 0.14 -36.4% 0.22 0.14 -36.0%
    Telemedia Services#            
    Revenue (Rs m) 7,123 8,436 18.4% 13,660 16,410 20.1%
    % of total revenues 10.0% 7.4%   9.9% 8.2%  
    Minutes billed (m) 4,596 5,002 8.8% 9,049 9,844 8.8%
    Revenue per minute (Rs) 1.55 1.69 8.8% 1.51 1.67 10.4%
    EBIT margin 23.5% 26.7%   19.1% 25.8%  
    EBIT per minute (Rs) 0.36 0.45 23.8% 0.29 0.43 48.8%
    Long Distance Services            
    Revenue (Rs m) 10,091 17,078 69.2% 19,768 32,829 66.1%
    % of total revenues 14.1% 14.9%   14.4% 16.4%  
    Minutes billed (m) 8,119 13,633 67.9% 15,218 26,003 70.9%
    Revenue per minute (Rs) 1.24 1.25 0.8% 1.30 1.26 -2.8%
    EBIT margin 27.3% 36.6%   27.9% 37.0%  
    EBIT per minute (Rs) 0.34 0.46 35.3% 0.36 0.47 28.7%
    Enterprise Services            
    Revenue (Rs m) 3,481 3,912 12.4% 6,166 8,170 32.5%
    % of total revenues 4.9% 3.4%   4.5% 4.1%  
    EBIT margin 35.6% 36.5%   34.1% 35.8%  
    Passive Infra. Services^            
    Revenue (Rs m) NA 12,279 NA NA 22,837 NA
    % of total revenues NA 10.7%   NA 11.4%  
    EBIT margin NA 8.9%   NA 11.2%  
    * As per Indian GAAP numbers. Excluding inter-segment eliminations; # Broadband & Telephone services have been renamed as Telemedia Services; ^ Share of revenue in the demerged tower subsidiary - Bharti Infratel Ltd.

    The other services lines of the company – Broadband & Telephone Services (these have been renamed as Telemedia Services, given the company’s foray into IPTV and DTH spaces), Long Distance Services (LDS) and Enterprise Services (ES) – also reported decent growth during the fiscal, with their sales growing by 18% YoY, 69% YoY and 12% YoY respectively. Revenue from the telecom tower subsidiary (Bharti Infratel) formed 11% of the company’s consolidated revenue during the quarter.

  • Bharti recorded a 1.7% YoY decline in its operating margins during 2QFY09. This was on account of higher network operating costs (as percentage of sales) that the company incurred during the quarter. These costs increased from 11.7% of sales in 2QFY08 to 16.1% in 2QFY09. The sharp rise in these costs was seemingly on the back of higher import costs of network equipments due to rupee’s depreciation against the US dollar. Based on business segments, the mobile services segment recorded the worst performance as its EBIT margins declined from 27.3% in 2QFY08 to 21.8% in 2QFY09.

  • Bharti’s net profits recorded a marginal 1.5% YoY growth during 2QFY09. The growth was largely impacted by accounting adjustment for foreign exchange fluctuation on loans and liabilities. Excluding this adjustment, growth in profits stands at 27% YoY. Growth in bottomline was also impacted on the back of lower other income, but was aided by a tax write-back.

What to expect?
    At the current price of Rs 610, the stock is trading at a multiple of 16.2 times its trailing 12 months earnings. Bharti 1HFY09 performance has been fairly in line with our estimates but for the forex losses (notional) that the company has booked on the back of rupee’s volatile moves against the US dollar. This we shall adjust accordingly in our forward estimates. Overall, the management has indicated of continued momentum in the mobile telecom market and has also sounded optimism on the company's new initiatives on the DTH front. We maintain our positive view on the stock from a 2 to 3 years perspective.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

BHARTI AIRTEL SHARE PRICE


Feb 23, 2018 (Close)

TRACK BHARTI AIRTEL

  • Track your investment in BHARTI AIRTEL with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

BHARTI AIRTEL 5-YR ANALYSIS

COMPARE BHARTI AIRTEL WITH

MARKET STATS