Bharti Airtel shares hit 52-week high after BofA Securities upgrades stock

Bharti Airtel reached a 52-week high of ₹1,069 on Wednesday's trading session, spurred by an upgrade from BofA Securities to a "neutral" rating. The accompanying increase in the target price was driven by anticipations of a forthcoming tariff hike.

The broking firm raised the target price of the telecom major to ₹1,145, an upside of 7% from the current levels. Analysts from BofA Securities anticipate a substantial increase in tariffs within the next 12 months, foreseeing potential benefits for Bharti Airtel.

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"We estimate over 20 percent tariff hike in 2024. The capex cycle pick-up is expected as Bharti's capex is based on improving handset penetration. We expect faster market share shift towards Bharti and Jio as 5G rollout scales up. However, the stock's valuations are not cheap at 9.4x FY25 proportionate EV/EBITDA," the brokerage firm said.

The Airtek stock has gained over 19.30% in the last six months and surged over 38.99% in the last one year.

Analysts anticipate a subscriber growth of 3.6 million and a 1.1% sequential rise in average revenue per user (ARPU) during the October-December period. 

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“ For Q3, we have factored subscriber growth of 3.6 mn (Q2FY24: 4 mn) to 346mn coupled with ARPU increase of 1.1% QoQ to ₹205. Airtel Africa business is expected to see revenue growth of 4% QoQ, and we have factored in a 4% QoQ growth rate for the enterprise business. Home services will see revenue growth of 8.1% QoQ with margin expansion of 20bps QoQ. For DTH we have factored a muted growth of 0.7% QoQ,” said Swarnendu Bhushan – Co-Head of Research, Prabhudas Lilladher Pvt Ltd.

Bhushan further said that Bharti’s Q3FY24E consolidated Revenue/EBITDA is expected to increase to ₹379bn (+2.3% QoQ)/Rs199 bn (+2% QoQ). The telecom major is also targeting ₹500bn market opportunity with its Enterprise offerings including CPaaS, cloud, cybersecurity and data centers as company expects 80% of corporates will put up 5G within next 3 years.