Analysts see good times ahead for Bharti Airtel stock

KS Badri Narayanan Chennai | Updated on April 15, 2020

A Bharti Airtel advertisement board   -  REUTERS

Company in better position to handle regulatory issues; tariff hikes to help fundamentals, say analysts

After a small blip between February 15 and March 25, the shares of Bharti Airtel resumed their rally as analysts remain bullish on the stock. As the telecom sector witnessed one of the worst periods last decade — due to the big scam initially and later by the Supreme Court ruling on payment of adjusted gross revenue (AGR) dues to the government — the shares of companies in this sector reeled under pressure.

Vodafone Idea, in fact, said it may have to wind up operations owing to the humongous AGR dues.

Amidst all these, analysts said Bharti Airtel is better placed to handle the crisis in the telecom sector well. Some of the analysts have expressed confidence in thestock, expecting it to be one of the leaders when the BSE Sensex /Nifty recovers.

The stock on Wednesday gained 3.6 per cent, to touch ₹530, in early trade on the BSE.

Break free

Every time the stock crashed to sub ₹250-level, it has made a strong recovery to move past ₹350. But waves of negative news have played spoilsport for the sector and the stock, said a Chennai-based analyst. “However, this time around, as the dust has settled, the stock managed to surpass the ₹500 mark comfortably,” he added. From a low of ₹260 in October 2018, Bharti Airtel climbed sharply to hit a peak of ₹565 in February this year. Even when other stocks faced pressure due to Covid-19 shutdown, Airtel remained relatively stable, he added.

Governance, value creator: Crisil

Recently, Crisil assigned ‘GVC Level-1’ rating to Bharti Airtel. It indicates ‘highest’ rating for the company with respect to corporate governance and value creation for all its stakeholders.

Angel Broking advised investors to accumulate the stock with a price target of ₹543. “Telecom operators have increased tariffs by nearly 35 per cent in November 19. There is a possibility of another round of tariff hikes by telecom companies in FY-21 given that tariffs are still very low. If Vodafone Idea goes out of business, Bharti would benefit significantly from addition of subscribers,” it added.

According to BoFA Securities, fundamental outlook on Bhar​ti Airtel’s equities and bonds is good. “Sustained and continued tariff hikes to help drive further consensus upgrades,” it said while retaining a buy call with a target price of ₹600. Similarly, Morgan Stanley maintained its overweight stance on Airtel with a price target of ₹575.

“We see limited impact of Covid-19, currency and crude price swings on the Bharti stock and believe that it is the best hedged to face regulatory woes,” Motilal Oswal Financial Services said, maintaining a buy rating on the stock with a price target of ₹620.

Big losses

However, investors should not forget the company posted its biggest ever losses last year. For the second quarter ended September 2019, it posted a quarterly loss of ₹24,513.50 crore and for Q3 ending December 2019, the reported loss stood at ₹3,388 crore.

Published on April 15, 2020

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