Bharti Hexacom stock plunges 6% on Jefferies' downgrade; check new target price

Stock has already doubled from its IPO price of Rs 570, within two months of listing on the bourses.

Bharti Hexacom share price plunged over 6 percent on June 27 after Jefferies downgraded the stock to 'hold' from their earlier rating of 'buy'. However, the international brokerage raised its price target on the counter to Rs 1,290 from Rs 1,200 earlier.

The revised price target is slightly higher than Bharti Hexacom's last closing price of Rs 1,257.15 on NSE.

In the recently concluded spectrum auctions, Bharti Hexacom acquired 15 MHz spectrum with an outlay of Rs 1,001 crore. According to Jefferies, while this acquisition was 'unexpected', it should help the company augment its data services.

To factor in the spectrum spends, Jefferies has cut its earnings estimates for Bharti Hexacom by 4 percent.

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The brokerage, though, continues to maintain that Bharti Hexacom's revenue and EBITDA will continue to grow at a compounded annual growth rate (CAGR) of 17 percent and 23 percent respectively over FY24-FY27.

However, Jefferies now sees limited upside in the shares of Bharti Hexacom considering the run-up it has seen since listing in April this year.

At 10:22 am, Bharti Hexacom shares were trading at Rs 1,178.90 on the National Stock Exchange (NSE). The stock has already doubled from its IPO price of Rs 570, within two months of listing on the bourses.

At current levels, the stock is trading at an EV / EBITDA multiple of 16 times, which is a premium of over 20 percent to Bharti Airtel's India operations, thereby limiting further upside, said Jefferies.

In an earlier report, Jefferies stated that Bharti Hexacom represents a strong investment opportunity in the Indian telecom sector. It allows investors to capitalise on the segments of Bharti Airtel's business that are experiencing faster growth, higher return on capital employed (RoCE), and better free cash flow (FCF) conversion rates, the brokerage said.

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