Bharti Airtel hits all-time high on robust outlook; stock up 20% in 3 weeks

Shares of Bharti Airtel hit an all-time high of Rs 627.95, up 5 per cent on the BSE in the intra-day trade on Tuesday, on encouraging outlook. The stock of the telecom services provider surpassed its previous high of Rs 623, touched on February 4, 2021.

In the past three weeks, the stock has surged 20 per cent, as compared to a 4.9 per cent rise in the S&P BSE Sensex. Last month, the Supreme Court (SC) dismissed the application of telecom companies that sought recomputation of Adjusted Gross Revenue (AGR) dues demanded by the Department of Telecommunication (DoT). At the same time, the country's premier communications solutions provider also upgraded its prepaid plans and postpaid plans.

According to analysts, Bharti Airtel has a clear advantage to further gain high-quality subscribers in both pre-paid and post-paid categories, considering Vodafone Idea’s weak financial position. Bharti’s 4G penetration at 57 per cent of its own India mobile subscribers and ongoing tariff hikes assure growth, they say.

In April-June quarter (Q1FY22), Bharti continued to showcase its strength - even in an otherwise muted quarter - with healthy 4G adds, revenue mix improvement, highest-ever home broadband subscriber adds and healthy free cash flow (FCF) generation. Bharti’s superior execution quality is reflected in its strong performance over the last four quarters (consolidated Ebitda growth of 30 per cent YoY despite no tariff hikes) as well as consistent subscriber and revenue market share gains.

"Although the recent tariff hike for selected customers is a clear positive, the same in the mass pre-paid segment remains key. Launch of JioPhone Next in September 2021 will be closely watched out for in terms of pricing aggression strategy. Despite high India capex in Q1, management reiterated its unchanged annual capex guidance of around Rs 24,100 crore for FY22", analysts at Emkay Global Financial Services said in a result update.

Those at Motilal Oswal Financial Services expect an FY21–23E consolidated Ebitda CAGR of 18 per cent on the back of 7 per cent Ebitda CAGR in Mobile India. While the street has expressed concerns about the timelines of a potential tariff hike, the brokerage firm believes strong earnings growth is achievable even without a tariff hike.

ICICI Securities, meanwhile, believes Bharti Airtel continues to report resilient numbers, especially on Indian wireless business front. "The strong margins traction and decent 4G net adds is a key positive. The non-wireless business momentum along with Africa performance continues to be robust. We see the favourable industry structure of three players (two being strong), a good enough kicker for eventual hike in tariff as well as superior digital play in medium to long term," the brokerage firm said.