Global brokerages Morgan Stanley and CLSA have retained bullish stance on Bharti Airtel as they expect improvement in company’s financials after it announced tariff hike on Sunday.
Morgan Stanley upgraded Bharti Airtel to ‘overweight’ and raised target price (TP) to Rs 530 from Rs 410 per share earlier.
The brokerage expects the company to see an improvement in profitability and balance sheet repair over next few years along with rise in average revenue per user (ARPU).
CLSA maintained ‘buy’ rating and increased TP to Rs 560 from Rs 515 earlier as it believes Bharti Airtel’s aggressive network rollouts and superior execution could drive upside to market-share forecast of 30 percent by FY22.
Bharti Airtel has raised prepaid tariffs by 15-40 percent across plans. It has also reduced promotional benefits in voice plans, taking effective hikes higher.
While the current tariff increases are applicable on prepaid subscribers which account for around 75 percent of Bharti Airtel’s mobile revenues, CLSA expects comparable hikes in post-paid tariffs too in coming days.
Consequently, the brokerage factors in around 40 percent tariff hikes by FY22 as compared to 35 percent earlier and raised FY21-22 ARPU estimates by 6 percent.
“Following our 3-8 percent forecast upgrade, we estimate Bharti Airtel to deliver a 24 percent EBITDA CAGR and cumulative consolidated free cashflows at Rs 444 billion over FY21-22. Meanwhile, outcome of Bharti Airtel’s AGR
Post the tariff hikes, Bharti Airtel and Vodafone Idea’s tariffs are at 35-57 percent premium to Reliance Jio, which may lead to subscriber churn. However, Reliance Jio too plans to raise tariffs by up to 40 percent, which should reduce the tariff differential back to 20 percent levels, CLSA added.
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First Published: IST