Bharti Airtel shares hit 52-week high, brokerages turn bullish on this telecom stock; check target price

Bharti Airtel shares surged 3.62 per cent to hit a 52-week high of Rs 552.85 apiece on BSE backed by strong 4G customer additions of 2.1 crore, 7 per cent on-year growth in revenues and a 73 per cent year-on-year rise in mobile data traffic. Post Bharti Airtel December quarter earnings, some brokerages have turned bullish for this telecom major, with an upside of around 19 per cent. “Bharti Airtel’s Q3FY20 numbers were operationally strong with 5.5% QoQ ARPU improvement (Rs 135 versus Rs 128 QoQ) and 3.6mn QoQ subscriber addition. Strong network investments, especially in urban areas, helped 20mn 4G subscriber addition (8mn in Q2FY20),” Edelweiss said in a research note.

Airtel’s customer base stands at 41.9 crore across 16 countries. The telecom operator’s consolidated EBITDA stood at Rs 9,350 crore and consolidated EBITDA margin was up by 42.6 per cent. Company’s India EBITDA margin was up by 13.3 per cent on-year. “Post successful capital raise, we believe Bharti is well placed to honour its AGR liabilities without compromising its abilities to make future network investments. Hence, incorporating higher profitability of Africa business and rising market share, we revise up FY21E EBITDA and EPS 4% and 31%, respectively. Maintain ‘BUY’ with DCF-based revised TP of Rs 634 (Rs 551 earlier),” Edelweiss said.

At 3 PM, Bharti Airtel shares were trading 2.35 per cent higher at Rs 546.05 apiece on BSE. The company had lost millions of subscribers in the first two quarters of the current financial year 2019-20, but gained 16 lakh subscribers in November 2019, according to data released by Telecom Regulatory Authority of India (TRAI). 

Bharti Airtel is expected to clear outstanding dues of Rs 35,586 crore to the department of telecommunications (DoT). Last month, the company had raised  $3 billion through a combination of the private placement of shares and an overseas sale of convertible bonds. This amount will be used to pay the AGR dues of Rs 35,000 crore. “It has raised Rs 210 billion through QIP/FCCBs which should cushion the risk of AGR liability. We assign EV/EBITDA of 11x to India wireless biz and 6x to Africa biz on FY22E to arrive at a TP of Rs 620 (prior: Rs 575). Maintain Buy. Our higher multiple to India wireless biz captures expected gains from growing market share (given VIL’s weak position) and potential government relief,” Motilal Oswal Institutional Equities said in a research note. 

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