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Bharti Airtel share price has been showcasing uptrend for the last one month, as the telecom stock has shot up from 658 to 698.7 apiece (today at 12:45 PM today on NSE), logging around 6 per cent rise in this period. HDFC Securities is expecting this rally in the telecom stock to continue in the next two quarters. 

In its latest report on Bharti Airtel shares, the brokerage has advised investors to add the telco stock in their portfolio when it comes in 669 to 681 range. The brokerage further advised to add more on dips to 605 to 617 price band.

Highlighting the fundamentals that may fuel Bharti Airtel share rally, HDFC Security report said, "Bharti Airtel has a healthy subscriber base and revenue market share with a pan-India network. While the number of subscribers in India has declined, largely driven by introduction of minimum recharge plans, the revenue market share has improved to 34.9 per cent as on 30 June, 2021. Its initiatives such as equity fund raising, and value unlocking in the African subsidiary (12 per cent stake in Mobile money for $300Mn to TPG & Mastercard), Indus Towers, and Bharti Telemedia, has helped contain debt."

The brokerage report goes on to add, "Also the company believes that going forward there’s a strong case for increase in tariffs and hopes that ARPU (Average Revenue Per User) will rise to 200/month by end FY22 (vs ARPU of 146 in Q1FY22). In the longer term, as per the management it targets ARPU of 300/month. Apart from future 5G rollout, unlike RIL JIO, Bharti has an inherent advantage of a large 2G and 3G customer base (operating at significantly lower ARPU), which will eventually transition to 4G, which will be APRU accretive."

Over the last 5 to 7 quarters, the Bharti Airtel has raised a sizeable quantum of funds in the form of equity and equity linked instruments, along with monetization of stake in some businesses. The telecom company also has an extensive access to financial markets and has a demonstrated track record of raising funds as and when needed. Recently, the company approved its plan to raise further capital of 21,000 crore through rights issue.

The multiple structural and process reforms in the Telecom sector approved by the Union Cabinet in Sept 2021 were much needed to help reduce the regulatory burden on Telecom Service Providers (TSPs). Bharti will now be able to defer around Rs4000 crore towards AGR and around Rs7500 crore towards spectrum dues in FY23E and use these to fund its 5G capex.

"We feel investors could buy the stock in the 669 to 681 band, and add on dips to 605 to 617 band. Base case fair value of the stock is 733 and the bull case fair value of the stock is 798," the brokerage report concluded.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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