Many analysts and brokerage firms are positive about the prospects of Bharti Airtel stock for the long term even though the telecom major missed Street estimates in its December quarter earnings.
Bharti posted a 92 percent year-on-year (YoY) rise in its consolidated net profit to ₹1,588 crore. However, the profit was down 26 percent sequentially due to higher operating expenses and an exceptional charge of ₹669 crore.
Moreover, the profit numbers missed Street expectations of a nearly 155 percent rise in its net profit in the quarter under review.
The stock has clocked small gains but outperformed the benchmark Sensex in the last one year.
MintGenie collated views of analysts and brokerage firms to understand what the stock's fundamentals and technicals are indicating. Here's what they said.
Fundamental views
Brokerage firm: Motilal Oswal Financial Services
The brokerage firm has a buy call on the stock with a target price of ₹985 which is a 28.5 percent upside from the stock's February 9 closing of ₹766.55 on BSE.
As per the brokerage firm, Bharti’s earnings should soften on slower 4G adds and limited tariff hikes in the near term. This, along with increased Capex intensity toward 5G rollout and rural coverage, should moderate FCF generation and the pace of deleveraging.
Motilal has revised its Capex expectation for FY24E to ₹35,900 crore by 21 percent. The brokerage firm expects a consolidated EBITDA CAGR of 13 percent over FY23-25E, and maintained its EBITDA estimates, led by a healthy 14 percent/13 percent growth in India Mobile/Africa growth.
"Over the next two years, it is well poised to gain from sector tailwinds coming from a combination of (a) market share gains (b) improved ARPU, led by premiumisation of customers, tariff hikes, and (c) non-wireless segments," said Motilal Oswal.
About the stock, Motilal said the near-term valuation multiples have remained under pressure, but long-term growth should garner better valuations.
Brokerage firm: JM Financial
JM Financial also has a 'buy' call on the stock with a target price of ₹940 which is a nearly 23 percent upside from the stock's February 9 closing on BSE.
The brokerage firm believes India wireless business tariff hikes are likely to be more frequent, going forward, given the industry requires higher ARPU (average revenue per user) to justify significant capex for the 5G rollout.
ARPU is a measure used by telecom companies, consumer communications, networking companies, etc. It is the amount of revenue generated on average from each customer. In short, it is total revenue divided by the number of subscribers.
JM Financial highlighted Bharti is the biggest beneficiary of higher tariffs given the sticky and premium quality of its subs, ensuring that tariff hikes flow through to ARPU.
JM Financial expects Bharti’s India wireless ARPU to grow at a CAGR of nearly 10 percent to ₹285 in FY28 versus ₹193 in Q3FY23). The brokerage firm estimates a consolidated EBITDA CAGR of nearly 15 percent over FY22-28.
Technical views
Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers
After making a top of ₹861 in November 2022, it has been making lower highs and lower lows structure since then which resulted in a 13 percent cut in price.
At the current juncture, it has broken the eight-month-old trendline (refer to the chart below) which is a matter of concern.
Moreover, after closing the gap of January 10, 2023, it has immediately reversed from that zone (refer to the chart below) which is hinting towards a downside in the coming few sessions.
"The daily MACD histogram is losing upside momentum while the daily RSI is reversing from the 50 level which is a negative sign for this counter. As of now, no fresh longs are advised," said the analyst.
Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has slipped slightly from the peak of ₹860 to consolidate near ₹760, maintaining above the significant 200DMA level of ₹752 to imply bottoming out.
The support is maintained strong near ₹755 and with a reversal anticipated can carry on the positive move further upward.
"One can watch for the support near ₹755 and expect a pullback for an initial target of ₹792 and thereafter, if given a breakout, it should carry on the momentum to ₹850," said the analyst.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
