Bharti Airtel drives steady rise in ARPU, keeps Jefferies bullish with 5.5% upside potential

Jefferies has reaffirmed its bullish stand on Bharti Airtel as the telecom major focusses on driving a steady, organic increase in its per-user average revenue.

The global brokerage maintained its 'buy' call on Bharti Airtel with a target price of Rs 1,300 per share. This implied an upside of around 5.5 percent.

The telco has been attempting to step up its ARPU by improving its subscriber mix and better monetisation.

According to the brokerage, there is clear headroom for tariff hikes, but the timing remains uncertain. Raising the tariffs will be the key for 5G monetisation and improving ROCEs.

Jefferies added that the Bharti Airtel management expects capex to moderate from FY25 onwards. The company is aiming to deleverage its balance sheet further.

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On March 18, Jefferies shared a list of its top 11 picks with potential to deliver returns at a compounded annual growth rate of 15-25 percent over the next five years. The stocks, ranging across sectors, were selected based on two major themes - strong fundamentals and long-term plays.

Bharti Airtel was among the 11 stocks chosen. The brokerage expects a 12 to 13 percent CAGR in India revenue or EBITDA from 2024 to 2030, driven by market share expansion and higher ARPU.

The generation of consistent free cash flow is seen as a factor that could lead to a shift in valuation benchmarks towards free cash flow yields, Jefferies believes.

On March 20, Airtel shares settled at Rs 1,231.8 apiece, higher by 0.26 percent. Over the past six months, shares have risen around 35 percent.

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