Buy Bharti Airtel, target price Rs 650: Motilal Oswal

Motilal Oswal has given a buy rating to Bharti Airtel with a target price of Rs 650. The share price moved down by 1.43 per cent from its previous close of Rs 401.55. The stock’s last traded price is Rs 395.80.

Bharti Airtel Ltd., incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 219695.29 Crore) operating in Telecommunications sector.

Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 23938.70 Crore, up 0.91 % from last quarter Sales of Rs 23722.70 Crore and up 15.43 % from last year same quarter Sales of Rs 20737.90 Crore. The Company reported net profit after tax of Rs -15357.80 Crore in latest quarter.

Investment Rationale
The brokerage has factored in spectrum renewal cost of INR129b for FY22E. It values Bharti on SOTP basis to arrive at a target price of INR650/share. It assigns EV/EBITDA of 12x to the India business and 6x to the Africa business on FY22E basis. It expects Bharti to generate post interest FCF of INR198b in FY22E even without any tariff hike. After factoring in spectrum renewal, FCF could stand at INR57b, and subsequently, be used for deleveraging. Strong FCF, improving RoCE and the expectation of an incremental price hike should garner better valuation for Bharti.

Promoter/FII Holdings
Promoters held 56.2 per cent stake in the company as of June 30, 2020, while FIIs held 20.5 per cent, DIIs 18 per cent and public and others 5.3 per cent