Moneycontrol Bureau
Bank of America Merrill Lynch has upgraded Bharti Airtel to buy with a target price of Rs 426 per share, The brokerage firm feels risk/reward is getting increasingly favourable, with Bharti well-placed to emerge stronger both in the voice and data markets. Shares of the telecom major rallied 3 percent intraday on Wednesday.
It expects Bharti’s India revenue market share to be largely flat for the next four years, despite the Jio entry. BoA ML projects a FY16-19 earnings per share (EPS) CAGR of 20 percent, led by steady EBITDA growth/deleveraging.
BoA ML expects 20-25 percent market share with smaller telecom companies to be up for grabs, as some telcos exit in the next few years and finds Bharti well placed to take this share. Furthermore, the company has taken corrective actions in Africa and reduced gearing by selling towers/exiting a few markets.
According to BoAML, Reliance Jio’s launch delay has given Bharti adequate time to prepare to compete with Jio. "Bharti has beefed up its 4G spectrum and has invested in analytics to selectively respond to Jio’s tariff cuts to select sub segments, rather than its entire sub base. Unlike its peers, Bharti can offer a converged offering and its network is well placed to withstand capacity overload," it says in a note.
In last five years, Bharti stock is down by 12 percent versus Sensex gain of 44 percent but In the last 6-12 months, fundamentals have improved. The stock was under pressure due to African acquisition dragging EPS, stiffer competition in India, an uncertain regulatory environment and Jio launch overhang.
At 14:49 hrs Bharti Airtel was quoting at Rs 351.40, up Rs 9.25, or 2.70 percent on the BSE. Posted by Nasrin Sultana Follow @NasrinzStoryReliance Jio is a part of Reliance Industries that owns Network 18 Media & moneycontrol.com
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