Buy Bharti Airtel For A Target Price of Rs 860 Says ICICI Securities

Bharti Airtel Limited is a leading multinational telecommunications services company based in India. On the NSE, the stock has risen from Rs 511.89 on March 30, 2021 to Rs 713.00 on March 28, 2022, 9:41 IST, showing a 39.29% return in a year. The stock has risen 3.14 percent on a year-to-date (YTD) basis and has climbed 2.42 percent in the previous six months. ICICI Securities sees more potential upside in the stock and has issued a buy call with a target price of Rs 860 and a 12-month target timeframe.

Key takeaways from Analyst Day of Bharti Airtel according to the brokerage

• The management reiterated the call for higher ARPU, another tariff hike by CY22 end and a couple more in the next few years (albeit inflationary trend, competitive stance and affordability a lower end could be a key deterrent in the near term, in our view). It outlined that US$3,3 (Rs 250) ARPU could propel RoCEs to 20% vs. 6% in FY21 at US$2.2 ARPU. It indicated that all heavy lifting in terms of capex is done. It also termed itself 5G ready with trails done, successful testing of use cases, 5G core & infra ready with only implication being on higher radio capex in near term, albeit with no major change in CAPEX in three-year period from current levels.
• Identified broadband to be area of focus with home pass expansion from 16 million to 40 million by 2025 through own and LCO model of expansion.
• It outlined emerging products under Enterprise such as Data Centre, IoT, Security, Cloud, Communication Platform as Service (CPaaS) and Network as a Service (NaaS) as another key area of growth (current cumulative market size of Rs 36000 crore and ~25%+ CAGR ahead).

Investment rationale for Bharti Airtel according to ICICI Securities

• Tariff hike flow through to boost Airtel's India ARPU, India EBITDA by 20%, 30%, respectively, from pre-hike levels.
• Relative market share gain from Vodafone India Ltd (VIL), given its stressed balance sheet and long term potential driven by growth opportunity from 5G & Enterprise.

Buy for a target price of Rs 860

As per the brokerage "Favourable industry structure of three players (two being strong), government relief, tariff hike and fund raise puts Airtel in a sweet spot to maintain its relative strength with a formidable digital ecosystem offering. We maintain BUY rating with an SOTP target price of Rs 860."

Any subscriber churn and higher spectrum and/or network capex in 5G remain the key risks for the stock according to ICICI Securities.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. 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.