Result impact: Brokerage views on Bharti Airtel, RIL, ICICI Bank

Bharti Airtel, Reliance Industries (RIL) and ICICI Bank are among the frontline companies that announced their respective June quarter (Q1FY19) results over the past few days.

Mukesh Ambani – controlled RIL posted a 17.9 per cent year-on-year growth in its June 2018 quarter (Q1) net profit at Rs 94.59 billion. Revenue for the period under review surged 54.3 per cent y-o-y to Rs 1.29 trillion.

ICICI Bank and Bharti Airtel, on the other hand, saw a drop in their profitability. ICICI Bank reported its first-ever loss amounting to Rs 1.2 billion for the June 2018 quarter (Q1) on Friday as provisions for bad loans doubled. The bank had made a net profit of Rs 20.49 billion in the same period last year. The loss would have been higher if it weren’t for the Rs 11.1 billion profit on the sale of its 2 per cent stake in the life insurance arm, ICICI Prudential Life Insurance.

Bharti Airtel, too, reported a net loss of Rs 9.4 billion in its India operations during the quarter ended June.

Here's how leading brokerages have interpreted the numbers.

JEFFERIES ON ICICI BANK

ICICI BANK posted a net loss driven by higher provisions owing to ageing non-performing loans (NPLs). However, overall slippages and stressed assets continue to improve even as provision coverage is taken up to 55 per cent. Core profitability, while modest, should improve going forward driven by improving loan growth and net interest margin (NIM). Return on equity (RoE) trajectory should improve to around 15 per cent by FY21E with core bank available at a cheap 1.1x. Retain Buy, lower price target to Rs 365.

NIRMAL BANG ON ICICI BANK

Per se, on the results front, IBL posted NII growth of 9.2 per cent YoY at Rs 61,019 million and a net loss of Rs 1,196 million. We have marginally modified our estimates for FY19/FY20 and retained Buy rating on ICICI Bank, revising our target price to Rs 414 (from Rs 409 earlier), and valuing the stock at 1.6x FY20E P/BV.

EDELWEISS ON RIL

With commissioning of mega core projects, we expect free cash flow (FCF) to turnaround, RoE to rise and profit to double in 4 years. Successful execution of RJIO bolsters our confidence in the mega venture. We factor higher Brent forecast of $68 ($66 earlier) and raise FY20EPS 7 per cent given high oil price leverage for key projects as well as higher retail contribution. Maintain ‘BUY’, with upgraded target price of Rs 1,457 (Rs 1,201 earlier), which is near the top-end of the street.

IIFL ON BHARTI AIRTEL

Though ARPU decline has slowed, Reliance Jio (RJIO) is still undercutting aggressively, especially the tariffs for feature phones, which would keep ARPU under pressure for the next two quarters. We are thus cutting FY19/FY20E revenue and EBITDA by 2.2 per cent/1.5 per cent and 7.7 per cent/4.9 per cent, respectively. That said, we believe industry consolidation will give Bharti an edge in gaining market share. Maintain ‘BUY’ with a revised target price of Rs 452 (Rs 529 earlier).

EDELWEISS ON BHARTI AIRTEL

Though average revenue per user (ARPU) decline has slowed, Reliance Jio (RJIO) is still undercutting aggressively, especially the tariffs for feature phones, which would keep ARPU under pressure for the next two quarters.

We are thus cutting FY19/FY20E revenue and EBITDA by 2.2 per cent/1.5 per cent and 7.7 per cent/4.9 per cent, respectively. That said, we believe industry consolidation will give Bharti an edge in gaining market share. Maintain ‘BUY’ with a revised target price of Rs 452 (Rs 529 earlier).