Top Telecom Stock To Buy: Non-Wireless Enterprise Grew Highest In Last 12 Quarters: Emkay Global

Top brokerage firm Emkay Global has given a buy rating to the stock of Bharti Airtel for high return. The company's strong total data and 4G subscriber additions of 5.8mn and 5mn, respectively, also supported the growth.

Stock To Buy: Target Price

The Current Market Price (CMP) of Bharti Airtel is around Rs. 820. Emkay Global has estimated a Target Price for the stock at Rs. 945. This stock has the potential to give a 15.24% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 463,831 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 820
Target Price	Rs. 945
Potential Upside	15.24%
52-week high share price	Rs. 841.45
52-week low share price	Rs. 628.75

Revenue growth

Bharti's consolidated revenue grew 5.2% QoQ, led by a 4% uptick in the India Wireless segment. Mobile ARPU grew 3.6% QoQ to Rs. 190, higher than our estimate of Rs. 185. While overall subscriber addition of 0.5mn was muted, data subscriber addition of 5.8mn was strong. Within the non-wireless segment, both Home Broadband and Enterprise reported healthy growth of 6.8% QoQ (the highest in the last 12 quarters for Enterprise). Margins for India Wireless expanded 120bps QoQ to 52.4% due to savings on SUC charges.

Increased Capex

Capex for the quarter came in at Rs. 70bn, with operating FCF (EBITDA-capex) of Rs. 106.7bn. India Wireless capex increased 6% QoQ, but is still low, considering the initial 5G rollout. Net debt inched up to Rs. 2.1trn, primarily on account of 5G spectrum purchase. The only misses in the quarterly results were sequential decline in the home broadband segment for a second consecutive quarter, higher marketing expenses, which can be attributed to another quarter of increase in churn.

Stock Valuation

Giving a buy rating, Emkay Global said, "Considering these strengths, Bharti could possibly surprise on the upside in 5G subscriber addition too, as the ecosystem evolves. Our capex (ex-spectrum) estimates of Rs. 870bn for FY23-25 seem slightly elevated, but are based on past trends; Company capex falling short of estimates is likely to lead to a bump-up in FCF. The quantum and timeline of the tariff hike will be the key monitorable. We currently build-in a tariff hike in Q4FY23, and any meaningful delay could be a negative. 5G phone shipments and the evolving ecosystem will be keenly watched."

Disclaimer

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.