Comments
Motilal Oswal
Target: ₹950
CMP: ₹759.65
Bharti Airtel has seen decent earnings growth for the last 12 quarters. However, we expect Bharti to witness a period of soft earnings given low probability of a price hike and high capex over the next 2-3 years given increased investments in 5G and rural densification. These factors could keep the stock range-bound in the near term, though our long-term Buy view remains intact.
The stock is trading at 6x on consolidated FY25E EV/EBITDA, with the India business trading at 9x and Africa at 3x. We have factored in 13 per cent consol. EBITDA growth over FY23-25 (without factoring in tariff hike) with a 3-5 per cent FCF yield.
Given the softness in profitability and increased capex, the FCF generation and deleveraging pace should moderate in the near term. As a result, the stock could remain range-bound in the short term.
While near-term earnings growth may remain soft, we believe Bharti and RJio should be the key beneficiaries of the structural change in the telecom sector. Unlike 3G/4G investment cycles when high capex was accompanied by heightened competition, which led to limited monetization opportunities, the current market situation is far superior.
However, the improving monetization opportunity may offset high capital intensity, driving better earnings and FCF generation in the next two years.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.