Bharti Airtel, announced its second quarter FY10 results on Friday, which were quite disappointing. The company’s net profit declined 7.8% to Rs 2,321 crore as against Rs 2,517 crore on a quarter-on-quarter (QoQ) basis. Soon after, the Bharti Airtel stock hit a 52-week low at Rs 290 on the exchanges. The stock was, two months ago, quoting a price of Rs 450.Is Bharti now so beaten-down that investors can buy at it current levels or is it wiser to stay away from it at even these levels, given the outlook of the telecom sector? Checkout stock analysis and outlook presented by Anand Rathi securities.
Stock close to bottom
“For Bharti, we are closer to the end now in terms of price damage,” says Sanjay Chawla of Anand Rathi Securities. “However, it is the time correction that is likely to be extended and that may well last for another three-six months.”
Chawla adds that market is eyeing two-three developments closely: the impact of tariff cuts on its margins and evidence of the pricing war bottoming out.
“Also, with the Unitech-Telenor launch, Docomo making rapid inroads and number probability to launch soon, the effect of that remains to be seen,” he says. “We don’t see that the time correction is going to end until Q1 results are out.”
He, however, added that stock was close to bottoming out and may stay at current levels for some to come.
“The earnings numbers that we saw are disappointing particularly the fact that the average revenue per user (ARPU) has declined 8% — even when the entire tariff cut was implemented much later,” says Hemang Jani, Senior Vice President, Sharekhan, adding that there was a feeling that the stock may under-perform for the next six months given the competition.
“However, the way I look at Bharti, it’s a company that makes a net profit of Rs 8,500 crore, available at about 11-12 PE and I don’t think we are going to see this kind of a scenario playing out for too long. From an investment perspective at 11 times forward PE, Bharti definitely looks attractive.”
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