We are increasing our mobile estimates in India by 8-15% to account for the price increase and expect Bharti to provide a Consolidated Ebitda CAGR of 21% in FY 22-24. Hold the purchase with a revised PT of Rs 925.

Bharti’s 20-25% prepaid rate hike reflects the fact that its goal is to drive accomplishments rather than aggressively gaining market share. We believe that Reliance Jio can increase the tariffs as well, as Bharti’s 20-50% premium gives Reliance Jio significant leeway to increase the tariffs.

Bharti increases prepaid rates by 20-25%: Bharti Airtel announced a 20-25% increase in prepaid rates effective November 26. After the sharp 60% increase in minimum prepaid voice rates from July 21 to July 21, Bharti increased those rates by an additional 25% to Rs 99 for a 28-day plan. The rates for the prepaid data segment have been revised by 20% in general.

The magnitude of the price increase is a positive surprise: The prepaid segment accounts for around 85% of Bharti Airtel’s mobile revenue in India and a sharp 20-25% increase in this segment will give a significant boost to Bharti’s overall estimates. While the 20% hike was a positive surprise compared to our expectations of a 7% hike in Q4FY22, we believe another rate hike may be unlikely in Q4FY23. Therefore, we are increasing our ARPU estimates by 8-10% and expect Bharti to have an Arpu of Rs 201 by FY24.

Why has Bharti increased the rates now? We believe that Bharti’s focus is slowly shifting towards increasing achievements rather than aggressively gaining market share. We underlined this change in intention after its segmented price increases in July. We also note that the company’s churn rate at T2FY22 was lower than expected despite sharp price increases in the prepaid voice segment. This may have boosted his confidence in his ability to pass on tariff increases. That said, after this hike, Bharti’s premium over Jio’s prepaid data rates dropped from 0-25% to 20-50%, which is pretty high.

Will Reliance Jio increase prices? We believe so. After the current price increases, the cheapest JioPhone plan gets a 37% discount compared to Bharti’s cheapest voice plan, which makes JioPhones more attractive to mobile phone users. This may result in new subscriber additions for Reliance Jio. On the prepaid data side, Bharti’s 20-50% premium on Jio gives Reliance Jio significant leeway to increase rates. We note that Reliance may need to offset this increase in smartphone prices with adequate reductions in JioPhone Next prices.

Increase Estimates / PT: We are increasing our India Mobile Revenue / Ebitda forecast by 8-15% on higher ARPU estimates. In FY 22-24, we expect Bharti to deliver a 17% / 21% CAGR in the console. revenue / EBITDA, assuming there will be no further rate increases until Q4FY24. Despite our projection of $ 11 billion in investments, including $ 2 billion for 5G spectrum, we expect Bharti to provide $ 5.3 billion in cumulative FCF in fiscal years 23-24. We are increasing our PT to Rs 925, implying a consolidated EV / Ebitda of 8.8x, broadly in line with Bharti’s 3-year average of 8.6x. Maintain Buy.

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