Goldman Sachs says Bharti Airtel offers high earnings visibility, foresees 38 percent FY21-24 EBITDA CAGR for wireless business.
Bharti Airtel
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Bharti Airtel share was trading higher in the afternoon on December 8 after Goldman Sachs maintained a “buy” rating on the stock with the target of Rs 870 a share, an upside of 22 percent from the current market price.
“Bharti Airtel offers high earnings visibility. We forecast 38 percent FY21-24 EBITDA CAGR for wireless business. See upside risks to earnings if ARPUs were to be closer to the company-guided number,” it said.
ARPU or average revenue per unit gives a picture of a business’ revenue generation capability and growth at the per-unit level.
“The stock trades at 8x FY23e EV/EBITDA, broadly in-line with its historical trading average. India business may generate USD 2.5 billion+ of annual FCF on average for the next four years,” it added.
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The stock was trading at Rs 710.05, up Rs 11.10, or 1.59 percent at 12.25 pm. It touched an intraday high of Rs 713.85 and an intraday low of Rs 703.40.
JP Morgan said the key risk for the telecom sector is SIM consolidation and downgrading for price sensitive customers.
“ARPU estimates increased by 7-10 percent, revenue by 4-7 percent and EBITDA by 6-9 percent over FY23-24. Bharti Airtel remains our top telecom pick,” it said.
ICICI Securities estimates Bharti’s ARPU to increase by Rs 26 to Rs 179. “(Bharti’s) Q2FY22 annualised consolidated EBITDA stood at Rs 55200 crore and the tariff hike should add 12.6 percent to it,” ICICI Securities’ analysts said in a report on November 24.
Moody’s on November 23 raised the ratings outlook for Bharti Airtel Ltd (Bharti) and its subsidiary Bharti Airtel International (Netherlands) BV to “positive” from “stable”.
“The outlook change to positive reflects Bharti’s improving operating performance and credit metrics which, if sustained, could support an upgrade to investment grade within the next 12-18 months,” Moody’s Senior Vice-President Annalisa Di Chiara said.
“The continued expansion in profitability, particularly at its core Indian mobile business, together with a steady reduction in its balance sheet debt, is needed to mitigate the potential effect on Bharti’s credit metrics of significant investments in 5G and the compounding growth of deferred liabilities during the moratorium period,” said Chiara, Moody’s lead analyst for Bharti.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
