Bharti Hexacomm comes under JM Financial coverage with 'buy' rating, target at Rs 790

Brokerage JM Financial has initiated a coverage on Bharti Hexacomm Ltd (BHL) ahead of its listing due later April 12 with a buy call

Brokerage JM Financial has initiated a coverage on Bharti Hexacomm Ltd (BHL) ahead of its listing due on April 12 with a 'buy' call and kept a target price of Rs 790 a share.

The IPO opened for subscription on April 3 and closed on April 5. On the last day, the issue was booked nearly 30 times. The Rs 4,275-crore IPO kept the price band at Rs 542-570 a share. Currently, its grey market premium stands at Rs 120 a share.

"(We increased price target and initiated buy rating) based on 10x FY26 EV/EBITDA (in line with implied valuation of Bharti’s India wireless business at CMP), implying a 39 percent upside. Though higher multiples can be argued for BHL given 2-3 percent higher EBITDA growth potential, we have used 10x multiple factoring in potential concentration risk due to BHL’s entire dependence on Rajasthan and NE circles and also on wireless business," JM Financial said in its report.

The stock could potentially double in 3-4 years on the back of 15-17 percent EBITDA compounding story. JM sees BHL as a mid-cap pure-play on wireless ARPU growth story vis-à-vis Bharti (which sees 25-30 percent of its value coming from other than India wireless business.

Bharti Airtel holds a 70 percent stake in Bharti Hexacom Ltd (BHL), with TCIL's stake reduced to 15% and public investors owning 15 percent post-IPO. BHL offers mobile, fixed-line, and broadband services in Rajasthan and North East under the Airtel brand. Wireless business accounts for 97-98 percent of revenue, while broadband contributes 2-3 percent.

BHL leads the NE market with a 52.7 percent revenue share, and ranks second in Rajasthan with a 40.4 percent share. EBITDA margin is expected to rise to 51.4 percent/57.1 percent in FY26/FY30, driven by ARPU growth, premiumisation strategy, and cost optimisation.

JM Financial expect BHL’s FY24-26/FY24-30 EBITDA CAGR to be higher at 17 percent/15 percent (as against 15 percent/12 percent for Bharti’s India wireless business) due to 2 percent subs CAGR and 10 percent ARPU CAGR potential as Rajasthan/NE circle has relatively lower teledensity and lower penetration of high ARPU postpaid and data subscribers.

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