Improvement in tariff outlook due to increase in Bharti Airtel’s market share among 4G customers, hike in voice tariffs and government support for Vodafone Idea Ltd (VIL_ to see Bharti grow its mobile ARPU by 13% in FY 23-25 Should help India’s growth, global brokerage Jefferies said market share gains are likely to accelerate amid the 5G rollout.
“While we cut our estimates by 1-4% to factor in the delay in tariff hikes, we upgrade bharti airtel shares‘ Rating to buy, after a decline of 13% since November 2022, the stock offers 16% upside potential for our rolled-back target price. 900 (before 850).
“We have cut our revenue/EBITDA estimates by 1-4% to factor in the change in tariff estimates and expect Bharti Airtel’s consolidated revenue/EBITDA to grow by 16% in FY23-25,” the note said. -17% CAGR can be expected.”
Bharti has seen an acceleration in market share among active 4G users, evident from its 60% incremental market share in 2HCY22 versus its overall market share of 30%.
This has helped Bharti Airtel improve its customer mix and increase its daily ARPU by 4.4% over 2HCY22. With another 107m voice subscribers on its network yet to upgrade to data, Bharti’s ARPU will grow by 4-5% annually due to an improvement in the subscriber mix.
Given this, Jefferies has upgraded Bharti to BUY target price The 900 offers up 16% and reflects an exit multiple of 7.6x EV/EBITDA – in line with the 10-year average. A delayed tariff hike is a major risk to its recommendation.
“VIL may potentially be able to secure incremental funding with government support, but it is unlikely to match Bharti/Jio’s $9/25bn capex plans over the next three years. Moreover, VIL is likely to gain market share as 5G goes mainstream. Early signs are already visible in the recent market share trends, where VIL lost 3 ppt market share in metro circles in 3QFY23. According to us, the fair value of Bharti can increase by this much. 120/share in Monopoly,” it added.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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