homemarket Newsstocks NewsThis telecom stock could rise 21% in the next 12 months. Here's why

This telecom stock could rise 21% in the next 12 months. Here's why

This telecom stock could rise 21% in the next 12 months. Here's why
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By Ajay Vaishnav  Sept 18, 2019 3:37:45 PM IST (Published)

Bharti Airtel shares quoted at Rs 337.90 apiece on the NSE at 2.01 pm, down by 0.57 percent.

Hong Kong-based brokerage CLSA has retained 'buy' rating on Bharti Airtel and raised target price from Rs 390 to Rs 415, with an upside potential of over 21 percent in the long-term.

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Bharti Airtel shares quoted at Rs 337.90 apiece on the NSE at 2.01 pm, down by 0.57 percent. The stock has lost almost 2 percent in the last two days.
CLSA sees Bharti Airtel management's focus on upgrading its 281 million subscribers to 4G data through bundled plans as a positive. At present, just 40 percent of Airtel's 281 million subscribers use on data, the brokerage said in a research report on Tuesday. CLSA estimates a 5 percent higher share of data users could boost average revenue per user (ARPU) by 3 percent.
Additionally, the telco's management sees limited disruptions in the home broadband market due to Reliance Jio Fiber's current pricing.
"Our analysis shows that while Jio Fiber’s price points are 13-23 percent lower, given its 20-40 percent lower data allowance, Jio Fiber is effectively 8-27 percent costlier than Bharti Airtel. We factor-in a 15 percent fall in Bharti Airtel’s broadband ARPU from Rs 840 to Rs 720 by FY22, and with broadband being c.3 percent of its consolidated Ebitda we see limited risk to our estimates," the report said.
Bharti Airtel's recent Rs 250 billion rights issues has helped the company's net debt to Ebitda decline by 3.2 times. With capital expenditure intensity likely to moderate, there is no compulsion for any further asset sales including a potential stake of Bharti Infratel, the CLSA report added.
Ltd reported a worse-than-expected quarterly, as the company lost more customers and spent more to upgrade its 4G network during the quarter.
The company's net loss for the three months ended June 30 was Rs 2,866 crore ($415.00 million), compared to a profit of Rs 97.3 crore a year ago. Revenue rose 4.7 percent to Rs 20,738 crore.
"Bharti Airtel is trading at its average valuation but on a depressed Ebitda. Further sensitivity of the stock’s valuation to ARPU is high, with every 5 percent increase in ARPU boosting our target price by 9 percent. However, visibility on our c.10 percent tariff increases for FY21 and 22CL are low with Bharti Airtel now accounting for 38 percent of new smartphone subscribers. Its revenue market share for FY21/22 may be ahead of our forecast of 28 percent (currently at 30 percent). We raise our target price from Rs 390 to Rs 415 as we roll over our valuation period to September 2020," the report said.
Global brokerage Citi has also maintained 'buy' rating on Bharti Airtel. However, it has cut its target price on Bharti Airtel to Rs 400 from a previous Rs 405 per share target.
So far this year, Bharti Airtel has returned nearly 18 percent to its shareholders, while the one-year return on the stock is slightly negative with the scrip correcting by 1.52 percent. The 10-year-return on the stock is also negative, with Bharti Airtel shares correcting by 17 percent.
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