Analysts upbeat on Airtel, bet on tariff hike post elections
Analysts see room for more gains in the stock on expectations of a tariff hike, higher average revenue per user (ARPU) - a measure of earnings generated from each user - and lower capex.
Mumbai: Most top brokerages raised or retained share price targets on , despite the telecom operator's profits declining in the March quarter, in anticipation of a after the ongoing general . The gained 2.75% to close at ₹1,345.9, after hitting its 52-week high of ₹1,356.85.see room for more gains in the on expectations of a tariff hike, higher average per user (ARPU) - a measure of generated from each user - and lower .
"Since the earnings are expected to move up by 16-18% in the next two years, there is an upside potential of around 18% this year (for the stock) with limited scope for downside," said Hemang Jani, director of , an investment advisory.
said that the decline in Bharti's net was due to currency devaluation in Nigeria and the lowered earnings estimates are also due to reduced Africa estimates. "The operational metrics of the India mobile business of Bharti Airtel were strong, which is why the net profit miss is largely discounted," said Kunal Vora, head of India Equity Research at BNP Paribas, which has a price target of ₹1,450 on the stock. "The expectation of a after the elections is also being seen as a positive." Vora said that historically the tariff hikes take place every two years but have been delayed this time due to the .
The tariff hike is likely to be around 15-20% in the next two years in a phased manner, said Jani. “This wasn’t possible earlier since Reliance Jio wasn’t keen on a tariff hike,” he said.
The price targets of various brokerages imply Bharti shares could gain between 4% and 22%. So far this year, the stock has advanced 32.7% against an up move of 1.9% in Sensex.
“The tariff hike along with reduced capex is expected to lead to stronger cash flows and deleveraging of their balance sheet which we see as a positive for the company,” said Vora. “Historically, the tariff hike has been around 20%.”
Some analysts said the share valuations of Bharti are rich after the recent gains.
HSBC said that the growth drivers for the company remain intact and the stock seems to be valued fairly, pricing in the benefits from mobile tariff hikes and lower capex intensity.
“We maintain our hold rating on the stock as we think it is pricing in benefits from the mobile tariff hikes and lower capex intensity,” said the brokerage, while setting a price target of 1,220 on the stock.
It’s the lack of investment options in the fast-growing telecom sector that makes Bharti a strong bet, said analysts.
Source: Stocks-Markets-Economic Times
