Brokerage firm Emkay Global has recently recommended investors to buy the stocks of Bharti Airtel. In Q4, the company has experienced the highest subscriber additions which stood at 3.1mn, beating the brokerage firm's expectation, and were also the highest among telecommunication companies. Its subscriber additions increased for the 3rd quarter in a row.
Target Price, CMP, and performance of Airtel
The Current Market Price (CMP) of Bharti Airtel is Rs. 696. Emkay Global has estimated a Target Price for the stock at Rs. 850. Stock is anticipated to give a 22.10% return, in 1 year. Although the stock market is sharply bearish now, the target price has been set for the next 1 year, expecting the stock will see a surge with robust revenue growth in the upcoming quarters.
|Current Market Price (CMP)||Rs. 696|
|Target Price||Rs. 850|
|1 year return||22.10%|
Bharti Airtel has posted another quarter of steady performance in Q4 with India wireless ARPU growing 9.7% qoq to Rs. 178, boosted by the Nov'21 tariff hike. Report informs that 4G subscriber additions were also robust at 5.2mn, underscoring the superiority of its network. On the non-wireless front, Home broadband saw 10% growth qoq on strong customer adds. Enterprise business's growth was steady, but DTH was under pressure.
Bharti reported consolidated revenues of Rs. 315bn, up 5.5% qoq, driven by the India wireless business. 4G subs addition, at 5.2mn, was also robust. Consolidated EBITDAM expanded by 169bps qoq to 50.9% on operating leverage. The momentum in Home broadband business continued, with revenues rising by 10% qoq. The Enterprise business's revenue growth was steady at 1.8% qoq.
Stock outlook and advantages: Emkay Global Stated
The brokerage firm has suggested buying Airtel's stocks with an upgraded target price, saying, "Going forward, data subscriber addition momentum, the 5G auction outcome and the potential timeline for further tariff hikes will be the key things to watch out. The current inflationary scenario is restricting customer upgrades as the cost of entry-level smart phones has risen. Our EBITDA estimate is 15% CAGR growth over FY22-24."
Emkay Global added, "The company's focus on non-wireless businesses has been reflected in strong revenue growth. Given strong earnings visibility, a potential tariff hike and deleveraging, the stock should remain a defensive play in the current weak markets, as we believe the impending 5G auctions will restrict any meaningful near-term upside. We have not incorporated into our estimates another round of tariff hikes (due to lack of clarity on timing) and the 5G spectrum purchase."
However, delays in wireless tariff hike; currency depreciation in the African markets; higher-than-expected 5G capex spends; and further stake increase in Indus Towers remain the key risks. Cash generation in Q4 was impacted by the reduction in trade payables and other assets and liabilities, etc.
About the company: Bharti Airtel
Bharti Airtel is a leading global telecommunications company with operations in 18 countries across Asia and Africa. Headquartered in New Delhi, India, the company ranks amongst the top 3 mobile service providers globally in terms of subscribers. In India, the company's product offerings include 2G, 3G and 4G wireless services, mobile commerce, fixed line services, high speed home broadband, DTH, enterprise services including national & international long distance services to carriers.
However, along with the company's promising Q4 results, its DTH segment has disappointed with a 4.6% qoq decline in the top-line. India wireless capex fell 12% qoq after a 36% qoq decline in Q3, while overall capex was only marginally lower qoq. Net exceptional gains stood at Rs1.5bn (Exhibit 2). In Q1FY23, Bharti's cash-flows should reflect the dividend proceeds from Indus Towers.
The above stock was picked from the brokerage report of Emkay Global. 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.