Bharti Airtel hits 21-month high, surges 20% from Friday's low

The company is hopeful that the government will take a considerate view on SC verdict on AGR matter, given the fragile state of the industry.

Shares of Bharti Airtel hit a 21-month high of Rs 420, up 7 per cent on the BSE on Monday and surging 20 per cent from its Friday’s low as most of the brokerages maintained a bullish stance on strong operating performance in September quarter (Q2FY20).

The stock of the telecom services provider was trading at its highest level since January 25, 2018. On Friday, November 15, it touched an intra-day low of Rs 351 on the BSE. Bharti Airtel hit an all-time high of Rs 527 on October 10, 2007.

Led by lower costs, especially, network operating expenses, selling & marketing as well as other expenses, the company’s operating profit was up 41 per cent at Rs 8,928 crore, which was better than the Bloomberg consensus estimate of Rs 8,388 crore. Consolidated operating profit margins, too, saw a jump from 31.5 per cent in the year-ago quarter to 42.3 per cent in Q2.

In Q2FY20, the company posted a pre-tax loss of Rs 31,334 crore due to a provision of Rs 28,450 crore for outstanding payments to the central government on account of the Supreme Court judgment on adjusted gross revenues (AGR).

On the AGR verdict of the Hon’ble Supreme Court, the management said it continues to engage with the government and are evaluating various options available to us. The company is hopeful that the government will take a considerate view in this matter, given the fragile state of the industry.

Sharekhan maintains ‘Buy’ rating on Bharti Airtel with a revised price target (PT) of Rs 440 per share. Steady EBITDA (earnings before interest, tax, depreciation and amortisation) performance, scope for further consolidation and improving free cash flow (FCF) position make us optimistic on the stock, the brokerage firm said in a note.

“Bharti Airtel posted better-than-expected operating performance, along with a moderation in capex spends. India Mobile EBITDA continued to improve and Africa business remained on the right track, helping quell any qualms about Bharti’s operational performance,” according to analysts at Emkay Global Financial Services.

“The anticipated weakening of Vodafone Idea’s financial viability after AGR penalties offers an opportunity for Bharti and JIO to gain market share. Eventually, two large players controlling the market could result in tariff increase as well, which we assume from FY22E,” the brokerage firm said in result update with 12 month PT of Rs 434 on the stock.

Meanwhile, shares of Vodafone Idea surged 22 per cent to Rs 4.50 on the BSE in the intra-day trade today on the back of heavy volumes. It has zoomed 72 per cent from its all-time low level of Rs 2.61 hit on Friday in the intra-day trade.