Bharti Airtel Is Motilal Oswal’s Top Stock Pick Today With Buy Rating: Here’s Why

Bharti Airtel has been chosen as the top research topic for today by the domestic brokerage business. Bharti Airtel (Bharti) delivered a great overall performance in 3QFY22, with a consolidated EBITDA rise of 6.5 percent QoQ. Bharti Airtel's stock is now trading at Rs 723.00 as of 1:39 p.m. IST on 10 February, and the brokerage has set a target price of INR910, implying a possible upside of 25.86 percent.

3QFY22 results of Bharti Airtel

According to the brokerage, the company's "Consolidated Revenue/EBITDA rose 5.4%/6.5% QoQ (2% above estimate each) at INR298.7b/INR147b, respectively, fueled by strong performance across segments particularly the India business. Excluding exceptional cost, net profit after minority stood at INR8.1b v/s INR5.9b in 2QFY22. This is a welcome change after the last few quarters' high exceptional costs. Mobile India revenue/EBITDA grew 6.5%/6.4% QoQ (inline), aided by strong 6.5% ARPU growth, gaining market share. Subscribers declined 560k to 323m, while 4G additions also dropped to 3m from 12-13m in the last fiscal because of tariff hikes. We expect this to revive from 1QFY23."

Motilal Oswal has said that "Despite the tariff hikes, data traffic remained strong and increased 6.7% QoQ to 120b GB with 19.9 GB/user. Among other segments, Africa's revenue/EBITDA growth was strong at INR 91.1b/INR41.1b (+6%/+5% QoQ) in reported currency. In constant currency (CC), revenue/EBITDA grew 5%/8%, respectively, aided by Subs/ ARPUs growth of 2%/6% QoQ. Home business improved strongly with revenue/EBITDA growing 12%/15% QoQ from healthy subscriber growth as coverage improved to 672 cities v/s 219 cities in Dec'20, led by LCO tie ups."

The brokerage has noted that "Capex softened to INR61b from ~INR70b run-rate over the last 3-4 quarters (INR197/INR241b in 1HFY22/FY21). Healthy FCF coupled with the INR52b rights issue saw net debts (excluding lease liability) reduced notably by INR74.3b to INR1,239b. With Google's fund infusion of INR52b and strong operating cash flow from tariff hikes, Bharti should further see a healthy INR80-100b (6%) deleveraging and sustained annual deleveraging of INR200b (15-20%) going forward."

Buy for a target price of INR 910

Motilal Oswal has claimed that "After gaining market shares in the last eight quarters, Bharti now has strong momentum in India Mobile/Africa and other non-mobile segments. We expect its 20% consolidated EBITDA CAGR over FY22-24, driven by tariff hikes and market share gains, to translate into a strong >INR300b estimated FCF (post-interest) and deleveraging potential. We believe this is not captured in the stock's valuation. Maintain BUY with a TP of INR910."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.