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Bharti Airtel up 45% in a year; Will the stock double in 5 years? Elara Capital says so

Bharti Airtel up 45% in a year; Will the stock double in 5 years? Elara Capital says so

Bharti Airtel up 45% in a year; Will the stock double in 5 years? Elara Capital says so
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By Pranati Deva  Oct 16, 2019 2:32:06 PM IST (Published)

Bharti Airtel has been in focus since the launch of Reliance Jio in 2016 which disrupted the telecom market. Despite that, the stock has risen nearly 29 percent since then. In the last 1 year, the scrip has gained 45 percent and 33.6 percent in 2019.

Bharti Airtel has been in focus since the launch of Reliance Jio in 2016 which disrupted the telecom market. Despite that, the stock has risen nearly 29 percent since then. In the last one year, the scrip has gained 45 percent and 33.6 percent in 2019.

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The stock has risen over 12 percent since last week after Reliance Jio said it would charge 6 paise per minute on off-net calls. The move, analysts believe, would be viewed as sentimentally positive for the telecom companies. Most analysts were bullish on the stock post this development.
According to a report by Elara Securities, the stock is likely to double in the next 5 years. It has set a five-year price target for the stock of Rs 800, more than double its current market price of Rs 383, adding that the catalysts are in place to alter the fortunes of the company. The company has steadily countered the new operator, Jio, and survived the storm, it said
"Bharti Airtel’s big moment of hurrah has begun after a decade of consolidation. The company has successfully weathered the Jio storm, beefed up its balance sheet and is looking to lead," the brokerage commented in the note.
According to the report, the life cycle of Bharti Airtel can easily be compartmentalised in three parts. The heady and glorious days of 2002/08 (phase 1), 2010-2019 — the phase of global expansion (Africa) and weathering the Jio storm (Phase II), 2019 -- (the resurgence-Phase III). Currently, the company has brought the leverage down, listed the Africa business and is now capitalised to fund growth.
There is no clear and present danger at the moment of an accentuated tariff war, Elara explained, adding that any cuts in tariffs will impact Reliance’s market capitalisation more than that of Bharti as Jio’s strategy is now is to focus on monetising the company.
Recently, CLSA also retained a 'buy' call on the stock and raised its target price to Rs 415 from Rs 390 earlier. The company's focus is on upgrading voice users to 4G bundled plans, the brokerage said. It added that the company sees limited disruption in home broadband at JioFiber’s current pricing.
In Q1, the company incurred net losses of Rs 2,866 crore impacted by a continuing tariff war with Reliance Jio. It had reported a consolidated net profit of Rs 97.30 crore in the corresponding period of fiscal 2018-19. Consolidated revenue from operations rose by 5 percent to Rs 20,737.90 crore in Q1FY20 as against Rs 19,799.20 crore in Q1FY19. However, the average revenue per user (ARPU) for Bharti's India operations in Q1 was Rs 129, the highest among the top three contenders.
Post the results, S&P Global said that Bharti Airtel’s Q1 2020 performance indicates improvement with telco’s revenue over the past five quarters has shown growth.
In Q2, Motilal Oswal expects the company's revenue to rise 1.9 percent to Rs 20,800 crore. The company will, however, post a loss in Q2 as well, said the brokerage. It estimates a loss of Rs 2,300 crore in Q2.
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