Bharti Airtel shares rise after steady Q1 show. Should you buy?
Premium- The hike in mobile service tariffs by Bharti Airtel during the reported quarter led to an increase of 25% in ARPU
Shares of Bharti Airtel rose in Wednesday's opening deals on the BSE after the telecom operator posted an over five-fold jump in its consolidated profit to ₹1,607 crore for the quarter ended June 2022, mainly on account of hike in tariffs, as compared to ₹283.5 crore in the same period a year ago.
The hike in mobile service tariffs by Bharti Airtel during the reported quarter led to an increase of 25% in average revenue per user (ARPU), a key measure of profitability, to ₹183 from ₹146 a year ago.
“We see potential upsides for both India and Africa businesses aided by steady earnings growth. We value Bharti on FY24E, assigning 11x EV/EBITDA to the India Mobile business and 5x to the Africa business, and arriving at our SoTP-based target price of ₹910. The ensuing earnings growth, 5% FCF yield, and ~25% deleveraging augur well for the stock. Maintain BUY," said brokerage and research firm Motilal Oswal.
Analysts at PhillipCapital also remain positive on the story and view it as the only investable stock in the sector. It has also maintained its BUY tag on Bharti Airtel shares with target price of ₹840.
“We continue to see Bharti in a comfortable position, post the Sep-21 sector reforms (read here), with lower repayment obligations and better cashflows. Its recent steps to prepay high-cost spectrum dues, refinance high-cost debt, and direct tariff hikes, indicate its endeavor to continuously improve business fundamentals," the note stated.
The company will start rolling out 5G services this month and cover all towns and key rural areas of the country by March 2024. "We intend to launch 5G starting August and extend to a Pan India roll out very soon. By March 2024 we believe we will be able to cover every town and key rural areas as well with 5G. In fact, detailed network rollout plans for 5,000 towns in India are completely in place," said Bharti Airtel managing director and chief executive officer (CEO) Gopal Vittal.
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