Stocks

Broker's call: Bharti Airtel (Buy)

| Updated on October 19, 2020 Published on October 20, 2020

Dolat Capital

Bharti Airtel (Buy)

Target: ₹605

CMP: ₹397.25

Bharti’s share price has declined sharply (nearly 30 per cent) since the AGR verdict on September 1, 2020. We believe this is on account of news flow of fund-raise by VIL, Jio postpaid plus plan launch and most importantly lack of good news on tariff increase. This is in contrast to expectations of immediate announcement of price hike post the AGR case closure. Our calculation implies that from an ARPU growth, market is now implying a de-growth. However, we still maintain that 15-20 per cent ARPU CAGR is likely and essential for survival of industry.

Contrary to stock reaction, business trajectory of Bharti remains healthy and positive especially in 4G smartphone subscriber additions viz. at par / ahead of Jio. MNP request from postpaid subscribers for transition to Jio postpaid is limited. A few months’ delay in tariff increase doesn’t alter the strong long-term industry potentials and consecutive positive bias of ours.

Continuity of VIL may be challenged in absence of meaningful tariff increase and fund infusion and improvement in execution (all inevitable).

Shutdown of VIL would imply value erosion for Bharti in tower business but would be more than off-set in wireless business. One of two scenarios viz. two-player market or ₹250 ARPU is likely.

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Published on October 20, 2020
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