Bharti Airtel headed for a multi-year breakout; stock can double from here

After recording an all-time high of Rs 543.55 in 2007, Bharti Airtel shares have traded in a broad range of Rs 520 to Rs 200 from mid-2009 till February 2020. Thereafter, the year 2020 saw the counter break past this consolidation range. However, the price action could not lift the volumes in the favour of the bulls. The selling pressure continued to dominate the stock price above Rs 600 mark.

At the current juncture, it will be Airtel's third attempt to conquer the selling pressure in the range of Rs 630 to Rs 600 levels. And if it breaks past Rs 630, then the stock price could double and enter the 4-digit club in the medium to long-term; possibly in the next eight to 15 months, as per the monthly layout on the chart.

The immediate breakout hurdle falls at Rs 900-Rs 925 mark, which is the basic difference of the tight consolidation range of 10 years and the differentiation of the selling pressure around Rs 600. While the counter witnessed a significant surge around Rs 600 mark earlier, it truly failed to attract market participants. But, now, if a multiyear breakout happens, the volumes may significantly change hands into the bullish phase and gain aggravated participation.

On a bigger timeframe, the support comes at Rs 480 and Rs 400 levels, as per the combination of monthly and yearly charts. CLICK HERE FOR THE CHART

Fundamental view

The Sunil Mittal-owned company reported a net profit of Rs 283.5 crore in the first quarter of the current fiscal (Q1FY22), which was much lower than the consensus estimates that had pegged the same at Rs 604 crore. The company had reported a loss of Rs 15,933 crore in the year-ago quarter on account of a one-time provision for dues related to adjusted gross revenue.

The June quarter profit, however, was aided by the sale of tower assets in Africa for $175 million (Rs 1,279.6 crore). On a sequential basis, the reported profit was down 63 per cent. 

At the fundamental level, analysts expect Bharti’s India mobile average revenue per user (ARPU) to rise as the company migrates subscribers from

2G to 4G, it gains high-value subscribers and further potential tariff hikes. Those at HSBC expect 4G subscriber penetration to surge to by around 85% by FY24e, which would further support ARPU improvement. 

"Thus, we expect consolidated revenue and EBITDA to expand at 8.5% and 10% CAGRs, respectively, over FY21-24e. Our target price is Rs 700 and we have a Buy rating on the stock," wrote Piyush Choudhary and Rishabh Dhancholia of HSBC in an August 4 note.