Bharti Airtel share price rallies 8.5% in 1 day despite MSCI rejig; should you buy this telecom stock?

Telecom giant, Bharti Airtel's stock price skyrocketed on Wednesday to emerge as the top gainer on BSE. The stock has rallied up to nearly 9% and touched a new 52-week high. The latest strong bullish tone is Airtel despite the MSCI Global Standard index rejig. The positive sentiment could be attributed to brokerages' likeness towards Airtel stock in the digital infrastructure segment. Airtel is expected to report strong India Mobile EBITDA CAGR ahead.

On BSE, Airtel's stock price closed at ₹857.40 apiece up by 4.78%. The stock gained by at least 8.52% with a new 52-week high of ₹888 apiece earlier in the day.

Airtel stock was in focus amidst many others who witnessed addition and decline in weightage at the MSCI Global Standard index for May 2023 rejig that came into effect from Wednesday.

This telecom services provider is among the stocks whose weightage has declined at the mentioned MSCI index. Now, Airtel's weightage stands at 2.4%, a drop of 0.07%, as per Nuvama Alternative & Quantitative Research.

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The upside in Airtel's stock price comes after when analysts continue to like this company in the telecom space. Q4FY23 results led to optimism in Airtel compared to its peers. The latest to recommend buy on Airtel would be BNP Paribas.

Airtel has continued to gain market share. In a research report dated May 29, Kunal Vora, Head - of India Equity Research at BNP Paribas India said, "Overall subscriber growth for the industry has stagnated over the last two years, during which the sector saw an impact of SIM consolidation post-tariff hikes. Post consolidation, VIL’s subscriber base continued to erode (c3 million loss) with deteriorating market share, while Jio led the pack (c6 million net additions), followed by Airtel (c3 million). On 4G subscriber additions, Airtel outpaced others with c7m net additions vs VIL’s marginal increase of 1 million."

He added, "Airtel continues to strengthen its network with rural expansion and rollout of its 5G services. Subsequently, Airtel saw the highest quarterly tower additions (c12k) in 4QFY23 (16% y-y increase in total sites) and c11% y-y rise in mobile BTS (base transceiver stations) installed."

However, Vora also pointed out Airtel's mobile service capex remained elevated at ₹66 billion during 4QFY23 (+2.6x yy), while VIL’s capex declined c50% y-y to ₹5.6 billion in 4QFY23 as it has likely prioritized vendor/bank payments in 4Q, in our view.

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He cited that Airtel expects FY24 capex to remain elevated, but reduce from FY25 onward, as rural expansion and 5G rollout would mostly be done by end-FY24.

For the overall telecom sector, Vora said, "With rapid rollouts of 5G infrastructure, we expect operators to look for ways to monetize the high capex incurred in FY23 by raising tariffs for 4G services and ARPU lift from 5G subscribers."

He likes Airtel in this industry. His note said, "We continue to like Airtel as a play on digital infrastructure in India. While the timeline for the next tariff hike remains uncertain, we expect Airtel to report a strong India Mobile EBITDA CAGR of 15% over FY23-25, along with a decline in capex."

Hence, Vora has given a 'Buy' recommendation on Bharti Airtel stock for a target price of ₹935 apiece.

Also, Motilal Oswal has set a 'Buy' rating on Airtel for a target price of ₹950 apiece.

Meanwhile, Axis Direct has set a target price of ₹960 apiece on Airtel with a 'Buy' recommendation.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.