Bharti Hexacom stock soars 9.5% after JPMorgan initiates coverage with 'overweight' tag

Just last week, another global brokerage, Investec initiated coverage on Bharti Hexacom with a 'buy' call

Shares of Bharti Hexacom surged as much as 9.5 percent on July 16 after global brokerage JPMorgan initiated coverage on the stock with an 'overweight' tag. The brokerage assigned a price target of Rs 1,280 for the stock, foreseeing a 20 percent upside potential from the previous closing level.

At 11.09 am, shares of Bharti Hexacom were trading at Rs 1,128.7 on the NSE. Volumes in the counter were also higher as 1.7 million shares changed hands on the exchanges so far, more than the one-month daily traded average of 1.1 million shares.

JPMorgan also called Bharti Hexacom the best pure-play in the Indian market for communication solutions. "Bharti Hexacom is the best play on market repair thesis, given its presence in wireless as compared to Bharti Airtel and Vodafone Idea," JPMorgan stated.

The company also operates in two underpenetrated circles of Rajasthan and the North East, that have lower telecom density, internet penetration and postpaid mix.

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Thanks to the underpenetration in these areas, the company enjoys stronger tailwinds from subscriber growth and organic ARPU(Average Revenue Per User) expansion, JPMorgan noted.

More so, the company's ARPU is only 2 percent lower than Bharti Airtel's which according to JPMorgan suggests that its underlying returns will remain superior.

Further, JPMorgan anticipates a 15 percent tariff hike each in FY25 and FY26 for Bharti Hexacom, which will drive a 17 percent and 21 percent revenue and EBITDA CAGR, respectively, over FY24-27.

As a result of these tariff hikes and decreasing capital expenditures, the brokerage expects dividend payouts to rise from 23 percent in FY24 to 34 percent in FY27, owing to the improving free cash flow.

Just last week, another global brokerage, Investec also initiated coverage on Bharti Hexacom with a 'buy' call, assigning it a target price of Rs 1,240, implying an upside of around 18 percent. The firm also believes the company is better placed to benefit from tariff hikes.