Analyst call tracker: Bharti Airtel target price raised amid ratings cuts; analysts search for growth

Bharti Airtel's share price rose 14.2 percent during the past six months, to Rs 856.40 at the end of August. This beats NSE Nifty 50’s 10.3 percent gain in the same period

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Bharti Airtel stock is among the 10 companies that saw maximum analyst downgrades in the last quarter, primarily as the run-up in the stock and absence of positive business triggers leave little room for further upside.

‘Buy’ calls on Airtel stock fell from 28 to 24, in three months to August, Whereas, ‘sell’ calls increased from three to four, and ‘hold’ calls from one to three. The ratings downgrade came despite the brokerages raising the target prices.

Bharti Airtel's share price rose 14.2 percent during the past six months, to Rs 856.40 at the end of August. This beats NSE Nifty 50’s 10.3 percent gain in the same period.

Why analysts downgraded Airtel

“Owing to the recent rally, there’s limited upside potential to be had on this counter,” Geojit Financial Services said in a recent note. The brokerage cut Airtel’s rating from ‘buy’ to ‘hold’, saying that the recent rally in the stock would cap the upside in price.

Dolat Capital mentioned the lack of tariff hikes in the near term and the price rally as headwinds for the stock. “We thus expect Bharti to go through a time correction in the near term”, it said in a note, and downgraded Bharti Airtel’s rating from ‘accumulate’ to ‘reduce’, citing the stock’s outperformance. Prabhudas Lilladher downgraded the ratings from ‘buy’ to ‘accumulate’, (buy, but in moderation), also based on the recent rally in share price.

… And why they raised the target prices

The ratings downgrades are despite the same analyst raising target prices, prompted by the recent run up in the stock. With the telecom industry becoming more of a duopoly as Vodafone Idea struggles to stem its customer loss, Airtel and Jio are set to benefit from the consolidation.

5G, customer additions among growth factors

Geojit increased the target price on Airtel stock from Rs 926 to Rs 954 based on SOTP (sum of the parts) method, citing the roll out of the 5G network, premiumisation of customers, and growth in African business.

Airtel’s ARPU (average revenue per user) increased to Rs 200 in Q1FY24 from Rs 183 in the year-ago period, helped by 38.3 percent YoY growth in postpaid customers and 11.9 percent growth in 4G customers. Mobile services in Africa grew 16.6 percent in Q1FY24 from the previous year.

Dolat Capital’s SOTP-based target was increased from Rs 845 to Rs 865. Airtel stock has already surpassed that to hit Rs 876. Dolat Capital said the accelerated growth in home broadband and enterprise business coupled with ARPU uptick, can drive growth in the long term. Prabhudas Lilladher increased the SOTP based target price from Rs 923 to Rs 935 as they increased their “FY24/FY25 ARPU to Rs210/Rs238”.

Other brokers are also bullish on Airtel due to these factors.

Axis Securities maintained the ‘buy’ call, and increased the target price to Rs 1025, a 15 percent upside from CMP (Current Market Price) of Rs 890. Similarly, Motilal Oswal kept the ‘buy’ call and increased the target price to Rs 1020 from Rs 950.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.