Airtel Can Expect Investment Of Up To 27%, According To Analysts

Analysts repeated their optimistic recommendations on Bharti Airtel. They advised investors to purchase the stocks on the basis that they can generate up to 27% returns from current levels.

Bharti Airtel shares increased as much as 1.3% on Thursday’s trade before ending at 800 at the NSE. It gained 0.98% from the prior close, due to a surge in trading volumes.

Over 10 million shares were traded on both exchanges or approximately 2.3 times the total average daily volume. Post-market times on Tuesday, India’s second-greatest mobile operator announced a combined 50% year-on-year increase in fourth-quarter net profit.

It is above Wall Street projections, albeit with slower Indian growth due to aggressive spending.

“Continued substantial growth in 4G/postpaid subscriber base, as well as the perception of resilient additional margins in India Wireless company and OCF generation, augur well for Bharti,” Morgan Stanley wrote in a client note.

According to a Bloomberg poll of analysts, 19 have a ‘buy’ or ‘outperform’ outlook on Airtel’s fourth-quarter earnings, three are neutral, and one has an ‘underweight’ rating on the stock.

Bloomberg figures show that the consensus price objective has dropped by 0.34% to $904.46 per share.

“We reduce our FY24/25E India Telecom earnings by 4%/3% along with Ebitda by 3%/2% as tariff hikes are delayed,” BNP Paribas stated in a client note.

“However, we anticipate Airtel to record a 30%+ earnings CAGR during FY 23-25,” the BNP Paribas statement mentioned.

Previously, a day after India’s second-largest telecom operator reported its fourth-quarter earnings, brokerages had remained upbeat on Bharti Airtel’s prospects.

The telecommunication profits have the market buzzing. Airtel’s shares gained 1.3% early Wednesday, even though the benchmark indices were trending lower.

Airtel exceeded analyst expectations with a net profit of 3,006 crores in the March quarter, up 50% year on year (YoY). The top line increased 14% year on year and 0.5% consecutively to 36,009 crores, in line with expert expectations.

Following the outcomes, most brokerages expressed optimism about the telco’s prospects. They highlighted positives such as a significant increase in the 4G user base and improved data usage.

According to Jefferies analysts, Airtel’s fourth-quarter results “were in line with estimates, as higher-than-expected success in India was partially offset by decreased revenue in Africa.”

According to experts, Airtel’s impressive 4G and postpaid customer improvements, rising free cash flows, and elevated growth forecast will ensure that its metrics maintain higher than peers.

Airtel’s 4G customer base continued to grow rapidly, with 7.4 million new users gained during March. This is more than Jio’s net increase of 6.4 million customers during the fourth quarter.

Subscriber turnover also fell to 2.8%, from 3% the prior quarter. “(The) company acquired 6.63 lakh customers in the postpaid section, which has kept continuing to see traction over the last few quarters,” Morgan Stanley analysts noted.

Despite increased capital investment due to 5G, the business forecasts Airtel’s financial situation “will strengthen sharply” in FY24.

Airtel also announced a 4 per share dividend, the biggest in the recent five years. Airtel’s EBITDA is expected to expand at an annualized growth rate of (CAGR) of 18% during the next two years, according to Goldman Sachs analysts.

As per the brokerage, this is “significantly faster” than the worldwide telco median of 4% to 5%. Profits before interest, taxes, depreciation, and amortization are referred to as EBITDA.

Airtel has aggressively expedited its 5G deployment. It claimed the lead with coverage in over 3,000 towns and cities alike.

The telco also stated that it would finish its pan-India launch by the final month of 2023, which is three months earlier than anticipated.
The introduction of 5G has increased its Indian unit’s capital spending, currently up 11% quarterly at 9,000 crores.

According to analysts, while Airtel’s investment would remain high in the short term because of the 5G rollout, this will fall to 17% of sales by FY25, down from 27% during FY23.

Analysts forecast a tariff increase in the following half of 2023, according to the consensus. The management remark during the post-earnings call scheduled for later in the day, on the other hand, will be closely scrutinized.

Tariff increases, if any, will enhance the company’s average earnings per user (ARPU), which has been stagnant at 193.

“With India’s wireless market restoration, Bharti Airtel’s free revenue has improved, and we feel it is well placed to contend against Reliance Jio in 5G rollouts,” strategists from Kotak Institutional Equities said.

The average of brokerage predictions suggests a target price of $898 in the following 12 months. It represents a 14% increase over the current market rate of $790.

Prabhudas Lilladher reduced its FY24-25 earnings expectations by 9.8%/11.7%, lowering ARPU increase by 2.4-3.7% due to pricing action delays and higher finance charges.

“Given the favorable competitive structure, we remain essentially optimistic on Indian telecommunications and BHARTI.” Bharti’s aggressive customer-focused growth ambitions will also create an upward spiral of growth, according to the brokerage.

It maintained its ‘Buy’ rating and reduced its target price to $875 from $977 before. Bharti Airtel shares traded 1.10% higher on the BSE at 801.00 a share at 10:25 a.m. on Thursday.

Bharti believes that current ARPU levels are blocked and expects the industry to work together to address the issue. The company chose to keep operating expenses in check through a ‘war on waste (wasteful expenditure)’ to maintain/improve its profit margins, according to Yes Securities.

“As a result of the slow rate of FCF formation, values may continue to fall,” Motilal Oswal remarked.

However, the brokerage firm predicts that over the next two years, Bharti Airtel would benefit from sector tailwinds such as increased market share. It also includes improved ARPU driven by customer premiumization, pricing rises, and non-wireless categories.

ICICI Direct kept its ‘Buy’ outlook on Bharti Airtel and maintained its target price of 960 per share, with an EV/EBITDA multiple of 9.5x for its India sector. The brokerage feels that Bharti Airtel is being rigorous in capital allocation.

It resulted in good FCF creation and a continuous decline in leverage, which will help solidify the value of shareholders in the coming years.

It added that the market share losses in India’s mobile business, as well as a rise in competition and regulatory pressures, will be crucial to monetizing 5G investment.

Airtel net gained 3.1 million customers in the March period, compared to 4.4 million in the previous quarter. As of the end of March, the overall subscriber base was at 375 million.

The Indian business spent Rs 8,989 crore on capital investment. Bharti Airtel’s price for the stock is currently $807.4, representing a 0.96% gain from the last trading session.

This results in a net shift in 7.7. Bharti Airtel shares are trading at $805.75, up 0.76 percent from the previous trading session.

The stock price has changed by a total of 6.05. Overall, the stock appears to be operating well and growing at a reasonable rate.

Proofread & Published By Naveenika Chauhan