Bharti Airtel Stock Price: Bharti Airtel shares have risen over 32 per cent in the last one year. The telecom stock is expected to see further 34 per cent returns as tariff hike is driving strong revenue and Ebitda growth in the sector. According to analysts at Motilal Oswal Financial Services, the telecom company’s growth is likely to get a boost from three levers-4G mix improvement, market share gains from VIL, and continued tariff hikes. These levers along with an incremental margin of 65 per cent should drive 18 per cent EBITDA CAGR for Bharti over FY22-24E,” the brokerage noted. It has a ‘buy’ call on the stock with a SOTP-based target price of Rs 910 premised on FY24 EV/EBITDA expectation of 11x for the India Mobile business and 5x for the Africa business.
Motilal Oswal said: “Over the last couple of years, though Bharti’s operational performance has been strong, it has lagged in FCF generation and deleveraging that has posed a key concern for the stock. FCF is a key factor in telecom business as technology upgradation continually keeps capex intensity high. However, we believe despite the upcoming investments in 5G, Bharti is witnessing a decadal shift in its FCF generation capability that could translate into healthy deleveraging.
Huge FCF Opportunity
According to the domestic brokerage firm report, Bharti Airtel is entering a phase of high FCF growth. During the last three years (FY19-22), the company’s EBITDA has jumped over 2x adding Rs 318b as against an average capex (excluding Spectrum) of Rs 233b (flat over the period). This translated into a significant FCF. However, Indus and DTH stake acquisitions, AGR payments and liability et al. have led to limited FCF and deleveraging. Analysts at Motilal Oswal expect Bharti to generate FCF (post-interest) of Rs 251b/Rs368b, i.e. 22 per cent and 47 per cent of its net debt (post-Ind-AS 116) in FY23 and FY24 respectively.
Growth Drivers: 4G mix improvement, market share gains, tariff hikes
Analysts stated the change in market construct over the last five years has allayed a big historical concern of the past decade when earnings were depressed and capex continued to rise leading to high leverage. Currently, the telecom sector consolidation has led to multiple rounds of tariff hikes, cumulatively >50 per cent, translating into 39 per cent increase in ARPU for Airtel over FY19-22; and nearly 5.3 per cent market share gains. “We see three levers of growth for Bharti: a) 4G mix improvement, b) market share gains from Vodafone Idea (VIL), and c) continued tariff hikes.These levers along with incremental margin of 65 per cent should drive 18 per cent EBITDA CAGR for Bharti over FY22-24E,” analysts said in the report.
Bharti Airtel Ltd., incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 3,96,514.56 Crore) operating in Telecommunications sector.
Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 31,518.90 Crore, up 4.8 per cent from last quarter Total Income of Rs 30,063.70 Crore and up 22.02 per cent from last year same quarter Total Income of Rs 25,831.20 Crore. The company reported net profit after tax of Rs 3,001.40 crore in the latest quarter.
In an earlier report, JM Financials had said that it believes tariff hikes are likely to be more frequent, going forward, with Jio more willing to participate in tariff hikes given that it also needs to start focussing on profitability (and not just on subscriber additions) as it prepares for its potential IPO in the next 1-2 years. In this scenario, the brokerage believes the sector could see a significant re-rating, and Bharti could gain significantly from that given the sticky nature and premium quality of its subscribers, ensuring that tariff hikes flow through to ARPUs.
Read all the Latest News , Breaking News , watch Top Videos and Live TV here.
Comments
0 comment