Bharti Airtel stock outperforms peers

At new 52-week high even as other stocks in the telecom sector struggle.

Bharti Airtel, the country’s largest telecom player, has emerged as an outperformer in the sector. The company’s shares have started a steady rally at a time when other telecom stocks are still struggling.

Over the last year, Bharti gave a robust return of close to 25 per cent while Reliance Communicatons (RCom) lost 38 per cent of its share value. Shares of Aditya Birla group’s Idea Cellular could manage a nominal return of 4.5 per cent. In the current financial year so far, Bharti shares have gained over 5 per cent while Idea Cellular has remained flat and RCom has lost 1.3 per cent.

“Bharti is now the favourite stock in the telecom sector. Since the industry’s downturn began in mid-2009, the company has overcome the damage by a large extent. In terms of the valuation, fundamentals and cash generating capacity, Bharti is better placed than its peers. Moreover, the company’s average revenue per user (ARPU) is much better in the industry,” says the research head at a domestic brokerage house.

According to Devang Mehta, vice-president (head-equity sales) at Anandrathi, “Telecom was a much beaten down sector. Bharti has emerged as the top performer. The company’s African operations are also expected to see a turnaround soon.” The company has consistently been the top pick of several brokerages in the telecom space for the last few quarters.

“We are maintaining a bullish view on Bharti from a 1-2 years’ perspective,” says an industry analyst at another Mumbai-based brokerage. “At at time when other players are still facing cash burns due to the 3G auction last year, Bharti is comfortably placed with adequate liquidity. Moreover, the company has held on to its revenue market share while others have failed,” he adds.

In a note, Sharekhan says, “The strong performance was on account of a series of developments, including an improving domestic environment and the likely clearance of the long-pending regulatory overhang on the sector.”

Moreover, analysts say there is not much impact on Bharti’s subscriber base due to Mobile Number Portability (MNP). “In fact, it has been a net gainer as against earlier expectations that the impact on Bharti would be strongly negative,” adds the note.

According to the latest statistics available from the Telecom Regulatory Authority of India (Trai), of 791 million mobile subscribers, Bharti had a subscriber base of 159 million or 20.1 per cent of the market share — the largest in the industry.

Brokerages have come up with their revised targets for the company. Motilal Oswal Securties had taken a buy call, with a target of Rs 410, while Sharekhan revised its target to Rs 398 a share.