Bharti Airtel’s Strategic Dominance and Undervalued Potential: A High-Conviction Buy

Bharti Airtel has delivered a transformative quarter, showcasing its ability to drive sustainable profitability, operational excellence, and strategic growth across markets. With a 77% year-on-year (YoY) surge in adjusted net profit to ₹5,223 crore, the company is positioning itself as a leader in a consolidating telecom landscape. Let’s dissect the numbers and why this presents a compelling investment opportunity.

The Numbers That Matter: Profitability and Margin Strength

Airtel’s Q4 FY2024 results are a masterclass in execution. The adjusted net profit jump to ₹5,223 crore (excluding one-time gains) reflects operational discipline and strategic capital allocation. Key highlights:
- Revenue rose 27% YoY to ₹47,876 crore, driven by India’s 29% revenue growth to ₹36,735 crore.
- EBITDA margins hit 57.2%, with India’s segment delivering a staggering 60% margin, underscoring cost control and premium pricing.
- Net debt-to-EBITDA ratio improved to 1.86x, down from 1.98x, signaling a strengthening balance sheet after prepaying ₹5,985 crore of deferred spectrum liabilities.

India: The Engine of Growth

India’s wireless segment is Airtel’s crown jewel. The ARPU (average revenue per user) surged 17% YoY to ₹245, a direct result of tariff hikes, premium service adoption, and a 21% YoY jump in mobile revenue. The company is winning by:
- Targeting high-value customers: Postpaid users grew to 25.9 million, with smartphone penetration rising 9.5% YoY.
- Network dominance: Added 3,300 towers and 13,600 mobile broadband stations in Q4 alone, expanding fiber by 44,400 km annually. This infrastructure fuels data usage, which now accounts for 70% of mobile revenue.
- Strategic partnerships: The Apple TV+/Music+ tie-up and SpaceX’s Starlink deal signal a shift toward digital services, boosting stickiness and ARPU.

Africa: Recovery to Resurgence

Africa, once a drag, is now a growth catalyst. Revenues rose 23.2% YoY in constant currency, with EBITDA margins expanding 120 bps to 47.5%. Key drivers:
- Market share retention: Added 2.1 million net customers, lifting the total base to 166 million.
- Data monetization: Data ARPU grew 15%, with usage up 30% YoY.
- Cost discipline: Reduced foreign currency debt to 93% of OpCo debt, shielding against volatility.

Why the Stock Is Undervalued

Despite the strong fundamentals, Airtel’s stock closed 2.5% lower at ₹1,824 post-earnings—a mispricing opportunity. Here’s why:
- Consensus target of ₹1,893 implies ~4% upside, but this understates the long-term value. Analysts project 20%+ EBITDA margin expansion over two years.
- Dividend yield of 8.9% (₹16/share dividend) offers income security.
- Undiscovered growth: The Homes business (10 million customers) and enterprise IT/cloud segments are underappreciated.

Risks, but Limited Downside

• Regulatory headwinds: India’s spectrum auctions and Africa’s tariff caps could pressure margins.
• Currency risks: Though mitigated by local debt, volatility in Nigeria and Malawi remains.

However, Airtel’s debt reduction, cash flow resilience, and strategic focus (e.g., exiting low-margin wholesale services) limit downside.

Conclusion: A High-Conviction Buy

Bharti Airtel is a multi-year growth story with strong fundamentals and underappreciated potential. The 77% profit jump, India’s ARPU surge, Africa’s turnaround, and disciplined capital allocation form a robust case for investment. With a target price of ₹1,893 and a dividend yield of 8.9%, the stock offers capital appreciation and income security.

Act now: Buy Airtel at ₹1,824. The path to ₹2,000 is clear—and the risks are priced in.

Disclosure: This analysis is for informational purposes only and should not be considered financial advice. Always conduct your own research or consult a financial advisor.