Good Morning Toasters!

Ssup friends!! Markets are shut today, unfortunately, as better than expected US Jobs data, a return of the famed FII investors and falling oil prices pushed headline indices higher. Paytm, which has touched a 6 month high, recorded gains of 6.5% as the company accelerated growth, while delivering below estimated losses.

In today’s issue, we cover Bharti Airtel’s quarterly numbers, as India’s largest Telecom Operator recorded another quarterly rise in Average Revenue Per User. The company successfully undertook price hikes, grew its subscriber base and churned out below-par customers.

We return with a technical piece on Persistent Systems, which has given multiple breakouts on daily and weekly time-frames.

Market Watch

Nifty 50: 17,525.10 | +127.60 (+0.73%)
FII Net Bought: INR 1,449.70 crore

Sensex: 58,853.07 | +465.14 (+0.80%)
DII Net Sold: INR 140.73 crore

Technical Setup

Persistent Systems gave a buy call?

• Persistent Systems provides software engineering and strategy services to help companies implement and modernize their businesses. The company has a global presence with a presence in 17 countries including India, Australia, Canada, Germany, Japan etc
• Analyzing Persistent on a weekly time frame indicates that the stock has recently given a breakout above the double bottom pattern (see image below)
• The midcap (28,000 crore+ MarketCap) finally managed to give a breakout after correcting almost 38% from its 52-week high

Interesting! What about a higher time frame. Tell me more about this 

• Looking at the daily time frame, prices have been making higher highs and higher lows resulting in a steady up-move in prices (see image below)
• The stock has recently given a breakout above its resistance (3673-3752)

Wow, sounds good, what does the buy call in the title mean tho? 😅

• Good Question! In the chart below we have plotted a 50-day SMA and a 20-day SMA. Yesterday’s candle post closing gave a buy signal as the stock experienced a positive crossover of the 20 DMA over the 50 DMA

Interesting! Final thoughts?

• On a weekly time frame, the breakout above the double bottom gives a positive indication
• On a daily time frame, prices making HH & HL and a positive crossover (buy signal) of the 20 DMA and 50 DMA add strength

Keep a track?

If you’re interested in financial news & analysis, and wish to receive this email in your mailbox consistently, click here to Subscribe Now

Around the World 🌎

• Carlyle Inc is set to get a new CEO: Mr. Kewsong Lee who joined Carlyle in 2013 and became CEO in 2022, and will leave the company at year end after a five-year tenure. In spite of his efforts to expand the company’s credit services and integrate its energy and infrastructure platforms, the company failed to expand under his leadership with shares trading much behind its peers. The company’s co-founder and ex-CEO, William Conway will take his position until a permanent successor can be found
• Are companies spending less on digital advertising? Rising inflation coupled with the global economic downturn has led to a big decline in digital advertising much to the worry of big tech giants like Meta Platforms,  Google parent Alphabet, Twitter etc.  In fact, U.S. television networks and publishers like Warner Bros,  Discovery,  NY Times and Paramount Global also saw a big drop in their digital advertising revenue in the last quarter. However,  industry stalwarts feel that this is just a short-term phenomenon and are confident that ad spending will grow – especially in categories like travel and technology
• UPS aims to expand its medical product distribution business: Italy’s Bomi group, operating in Europe and Latin America, is engaged in the distribution of medical products to clinics, hospitals,  laboratories and directly to patients. It has recently been acquired by Atlanta based transportation giant United Parcel Services at a value of 700 million dollars. With this deal, UPS is gaining 350 temperature-controlled vehicles and 4 million sq. feet of space which will greatly help in its expansion of the distribution business – especially specialised products which require time-critical and temperature-sensitive logistics

Company News

Airtel ARPUs increase again; what’s up and what do you need to know?

• India’s largest telecom operator (sorry Jio) reported a steady set of results, as revenues increased 4.1% QoQ and 22% YoY to INR 328 Bn, as the India Wireless Business (bread & butter) was up 3.4% QoQ, led by higher ARPUs and increasing market share gains in 4G services (more on this below)
• Consolidated EBITDA for the company expanded by 3% QoQ (in absolute terms), even as the company’s EBITDA % contracted by 0.5% to a whopping 50.4% (damn), laying bare the high return business telecom operators run
• The company’s Net Debt to EBITDA ratio (key in telecom given high auction prices and other Capex) came in at 2.5x vs 3.0x during the same period from a year ago, even as the company’s overall debt increased on account of higher lease obligations
• Average Revenue Per User inched upwards for the company again (touching INR 184 from INR 178 in the last quarter), as the price-maker of the two-and-a-half market Telecom Industry continued to undertake price hikes, and fine-tuning / discontinuing lower paying subscribers

Interesting! Tell me more? What about the other businesses, 4G growth, 5G spectrum auction? (Yess my man)

• The subscriber base increased (India Wireless Business) by 1.3 Mn during the quarter, coming in at 327.3 Mn at a pan-India level, as Data Subscribers expanded by 4.8 Mn to 213.3 Mn, while 4G additions came in at 4.5 Mn
• Consumption per user for Airtel was best-in-class, at an industry level, as data usage per customer stood at 19.5 Gb per month, while voice usage per customer stood at 1,104 minutes/month, in line with its peer set (Jio)
• The company’s Home Business Segment grew ~42% YoY, as the company added 1.4 Mn customers, touching a total count of ~4.8 Mn customers; Digital TV’s customer base stood at 17.4 Mn subscribers at the end of the quarter
• At the recently held 5G auctions, Airtel was the second highest bidder/acquirer of the spectrum (after Jio ofc), onboarding 19,867.8 Mhz of the spectrum, enabling the company to have the widest mobile broadband footprint in the country, and ushering in the 5G era (enough mid-band spectrum in 700 Mhz category)

Got it! Final thoughts? Any stock view?

• In a quarter that was originally overshadowed by Adani’s potential entry into the Telecom space, which accordingly impacted the stock price, Bharti Airtel has been quietly building out its strong franchise, ensuring it maintains its position as the price maker while recording consecutive quarters of ARPU growth
• On a YTD basis, the stock gave up all its gains in the recent past, and is up only ~2%, while is up ~6.7% in the last month, post clarity of Adani’s initial role within the space (over the longer term)

Keep a track?

What else caught our eye? 👀

More homes for tier 3 and tier 4

• The demand for home loans has increased in tier 3 and tier 4 districts and it seems like India’s ₹24 trillion home loan market will double itself in five years
• Housing loans, which held a share of 13.1% in March 2020, now make up 14.4% of the total bank credit as of June 2022
• The government’s SVAMITVA scheme along with AMRUT, PMAY(U) and Smart Cities Mission has caused this surge by creating a healthy ecosystem, especially in the villages of Haryana and Uttar Pradesh

Tata Motors to afford Ford

• Tata Motors is about to sign an agreement with Ford Motor Co. to buy its plant in Sanand Gujarat and it’s ready to pay ₹700 to ₹750 crores for the plant and its workforce of around 1,400
• This acquisition will allow Tata Motors to pull up its Sanand capacity to almost a million units annually. But that’s not all. While Tata gets a readymade, state-of-the-art plant set for plug-and-play, Ford also retains a part for export as the Tata owned plant will be jointly operated with Ford
• The deal will also fortify Tata’s Electric Vehicle business and help it achieve the target of building a portfolio of 10 models by 2025 with an investment of $2 billion in the segment

Results Preview:

Tuesday, 9th August: MRF, Tata Chemicals, Prestige Estates Projects, IGL, ABB India

Wednesday, 10th August: Pidilite, IPCA Labs, Max Healthcare, Tata Consumer Products, PB Fintech, SAIL, Zydus Lifesciences, Coal India, IRCTC, Oil India, Cummins India, Glenmark Pharmaceuticals, Metropolis Healthcare, Abbott India, Eicher Motors

Educational Topic of the day

What is ARPU?

• ARPU stands for Average Revenue Per Unit. Mobile phone service providers may even refer to it as average revenue per SIM card.
• It is the indicator of the profitability of a product based on the amount of money that is generated from each of its users or subscribers
• Analysts and investors find it useful to compare ARPU numbers from rivals in the same industry (like Vodafone Idea, Bharti Airtel and Jio)

Edited by Raunak Karwa

Let’s connect, I always love hearing from you. Hit me up at Raunak_Karwa on Twitter or Raunak.karwa@finlearnacademy.com