Target: ₹1,032

CMP: ₹761.30

We initiate coverage on Bharti Airtel Ltd (Bharti) with ‘Buy’ rating at SOTP based TP of ₹1,032. We believe Bharti is a compelling play on multiple growth opportunities in emerging digital economy given: strong brand presence across mobile, enterprise business, home services, DTH and Africa business; focus on attracting high quality discerning customers for ARPU expansion (ARPU at ₹266 in FY25E v/s Rs163 in FY22); digitisation and innovation with supportive government policies; and affordable 5G rollout wherein Bharti will use existing 4G infrastructure with 3.5GHz spectrum acquired recently.

The Indian telecom sector is expected to enter into a strong growth phase as wireless revenues will grow at 17.7 per cent CAGR to ₹2.9-lakh crore over FY22-25. Underpinned by these positives, we expect Bharti’s consolidated EBIDTA/PBT to increase at 21.8 per cent/84.2 per cent CAGR over FY22-25.

Bharti has raised Rs1 lakh crore through various financial instruments and stake sale in businesses (Airtel Africa and tower assets), which along with improving fundamentals has cut Bharti’s Net debt/EBIDTA (ex lease) to 0.5x for FY25 from 2.1x in FY22.

We expect ROE to improve to about 22.1 per cent for FY25 from 6.9 per cent in FY22. We expect FCF of about ₹39,800 crore for FY25 with reduction in net debt to ₹54,800 crore.

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