Bharti Airtel stock top Nifty gainer, jumps 3%; brokerages raise target prices on tariff hike, ARPU optimism

Over the past year, Airtel shares have gained around 67 percent in trade.

Bharti Airtel stock was the top Nifty gainer on May 16, jumping as much as 3 percent amid the Street optimism over impending tariff hikes, ARPU improvement, and 5G network expansion.

Brokerages retained their bullish calls on Bharti Airtel despite the telecom major recording a 31.1 percent fall in consolidated net profit for the March quarter of the financial year 2023-24.

Bharti Airtel's consolidated Q4 revenue came in at Rs 37,599 crore, up 4.4 percent from the previous year, impacted by the devaluation of African currencies during the period, particularly Nigerian Naira.

While revenue met expectations, the net profit was below Street’s estimates. Brokerages pegged Airtel’s net profit at Rs 2,201 crore-Rs 5,309 crore range.

At 10.20 am, Bharti Airtel share price jumped to Rs 1,343 the NSE, up 2.5 percent from the previous close.

Also Read | Bharti Airtel Q4 net profit falls 31% to Rs 2,072 crore

Capex to moderate

Bharti Airtel reported a rise in its capital expenditure (capex) for the quarter, reaching Rs 10,500 crore as opposed to Rs 9,300 crore sequentially. The company's management revealed a strategic shift towards expanding the 5G rollout in rural regions.

Despite this expansion, the management anticipates a reduction in capex for FY25 compared to FY24, citing the ongoing challenge of monetising 5G infrastructure. HSBC noted its anticipation of favorable outcomes stemming from reduced capex intensity.

APRU seen at Rs 300

The telecom operator added 7.8 million smartphone customers and delivered an industry-leading ARPU (average revenue per user) of Rs 209.

The company indicated that it was looking to implement tariff hikes, which would take its ARPU to Rs 300. Motilal Oswal noted, even at Rs 300, the ARPU would be the lowest in the world.

Bharti Airtel's management reiterated a “need for tariff repair” in the industry, which will help the industry improve return ratios. However, if the competition does not follow suit, the tariff hikes will hurt Bharti Airtel. Therefore, the management is waiting for the right time to implement tariff increases.

Outlook

Brokerage remained positive on the outlook for Bharti Airtel, as it remained the most experts' top pick in the space. The positivity surrounding the teleco was underpinned by the imminent tariff hikes, sustained strong delivery across key segments of enterprise and homes, and projections of robust consolidated EBITDA growth of 20 percent CAGR over FY25F-26F, despite the impact from the Africa business.

Nomura added that it was bullish on Bharti as the net debt seems to have peaked out, given completion of the 5G rollout, declining capex levels and robust operating cash flows, and improvement in return ratios.

Should you buy, sell or hold?

Given high expectations of a tariff hike post-elections by all players, Bharti is in an enviable position, said Nuvama Institutional Equities. The brokerage raised its price target on Bharti Airtel to Rs 1,600 from Ra 1,580 while retaining its buy call.

Motilal Oswal saw a 25 percent upside on Bharti Airtel after hiking the target price to Rs 1,640 apiece.

"We believe Bharti will continue to benefit from its higher-quality subscriber base vs peers and be able to leverage its significant digital and enterprise initiatives in a 5G landscape, which will enable its transition from a telco to a tech company in the coming years," said international brokerage Nomura.

Nomura also increased its target prices on Bharti Airtel to Rs 1,550 respectively, while keeping its buy ratings intact.

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