Bharti Airtel hits all-time high in weak market; zooms 63% thus far in FY24

Shares of Bharti Airtel hit a record high of Rs 1,218.65, up 2 per cent on the BSE in Friday's intra-day trade in an otherwise weak market on expectations of strong operational performance. The stock of telecom services provider surpassed its previous high of Rs 1,218.20 touched on March 11. Meanwhile, the S&P BSE Sensex was down 0.75 per cent at 72,547 at 12:35 pm.

In the past one month, Bharti Airtel has outperformed the market by surging 9 per cent, as against less than 1 per cent rise in the BSE benchmark index. Thus far in the financial year 2024 (FY24), the stock has zoomed 63 per cent. In comparison, the S&P BSE Sensex has rallied 23 per cent.

Bharti Airtel is the second-largest mobile-service provider in India. The Indian telecom industry has gone through a period of consolidation, which has resulted in Airtel emerging as the number two service provider in India by revenue.

Airtel has a strong focus on quality customers with increasing average revenue per user (ARPU) and revenue. The management is confident of gaining industry-leading growth backed by robust rural penetration and a superior services portfolio. The Capex, however, will remain moderate in FY25.

In past two years, the company increased its investments as it expanded its rural coverage and rolled out 5G in urban markets. With peak capex behind us, analysts at BNP Paribas India expect annual capex to decline year-on-year (YoY0 in FY25.

BNP Paribas expects the Indian telecom industry's revenue growth to remain in double digits over FY23-26, led by tariff hikes and customers upgrading to bundled plans. Analysts expect Airtel to gain market share as Vodafone Idea’s revenue market share continues to shrink. In FY25, the brokerage firm expects strong EBITDA growth, helped by tariff hikes and moderation in capex. They expect these factors to boost FCF generation and help deleverage the balance sheet.

From a long-term perspective, analysts at Axis Securities believe Bharti Airtel would continue to gain market share, backed by the highest penetrations, and with minimum Capex requirements. With a stronger digital portfolio supported by rising per-user data, the brokerage firm is positive about the future growth of Airtel.

In the near term, Bharti’s earnings should soften with ~3 per cent QoQ growth, unlike average 5 per cent growth seen in the last eight quarters. This could be attributed to moderating growth from 4G mix benefits, low probability of tariff hikes, and softening market share gains. However, the long-term sector outlook remains buoyant with opportunity to grow market share as well as drive tariff hikes led by sector tailwinds, wrote Motilal Oswal Financial Services in its telecom sector update.