Bharti Airtel stock hits 7-week high; shares surge 4% on heavy volumes

Till 12:25 PM, as many as 2.48 million shares have changed hands, as compared to around 2 lakh shares traded in the past two weeks, exchange data showed

Bharti Airtel shares have moved higher by 4 per cent to Rs 1,677.05, hitting a seven-week high on the BSE in Friday’s intra-day trade amid heavy volumes. The stock of the telecom services provider was trading at its highest level since October 28. It had hit a record high of Rs 1,778.95 on September 29.

 

The average trading volumes on the counter jumped over 10-fold on the BSE. Till 12:25 pm, as many as 2.48 million shares had changed hands, as compared to around 2 lakh shares that were traded in the past two weeks, exchange data showed. Bharti Airtel is trading higher for the third straight day, surging 6 per cent during the period.

 

On Wednesday, December 11, the Special Committee of Directors for Fund Raising of Bharti Airtel, approved the allotment of 1 million equity shares at a conversion price of Rs 515 per equity share to FCCBs (Foreign Currency Convertible Bonds) holders, upon receipt of notice for conversion of FCCBs of principal value of $7.152 million. CLICK HERE FOR DETAILS

 

FCCB is a debt instrument to raise funds from overseas market. Such bonds have a fixed coupon rate and principal payments, and also give bondholders the option to convert their holdings into stocks.

 

Bharti Airtel is a global communications solutions provider with over 550 million customers in 15 countries across India and Africa. The company is India’s largest integrated communications solutions provider and the second largest mobile operator in Africa.  Its retail portfolio includes high speed 4G/5G mobile broadband, Airtel Xstream Fiber that promises speeds of up to 1 Gbps with convergence across linear and on-demand entertainment, streaming services spanning music and video, digital payments and financial services.

 

Thus far in the calendar year 2024, Bharti Airtel has outperformed the market by zooming 65 per cent on expectations that the company’s earnings and cash flows are set to rise over the next 24 months, benefitting from the industry-wide hike in mobile tariffs in India. In comparison, the BSE Sensex has gained 13 per cent during the period.

 

On November 22, 2024, S&P Global Ratings revised its rating outlook on Bharti Airtel to positive from stable. The ratings agency projects earnings before interest, tax, depreciation and amortisation (Ebitda) from Bharti Airtel's Indian operations to rise 18-20 per cent in fiscal 2025 (year ending March 31, 2025), and by a further 12-15 per cent in fiscal 2026.  Most of this growth will come from the mobile segment. S&P Global Ratings also anticipates a higher earnings from Bharti Airtel's home and enterprise segments owing to increased uptake of home broadband and enterprise digitalisation.

 

“The positive rating outlook reflects our expectation that Bharti Airtel's improving earnings and commitment to deleveraging will result in improved financial flexibility over the next 12-24 months. We forecast the company's FFO-to-debt ratio will improve to well beyond 30 per cent over the period. Our outlook also reflects our expectation that Bharti Airtel will maintain its competitive position,” S&P Global Ratings said.

 

Analysts at ICICI Securities have a ‘Buy’ rating on Bharti Airtel with a target price (TP) of Rs 1,875, as the brokerage firm believes its valuation rerating is supported by solid fundamentals. Five key parameters, which influence telcos’ valuations, have shown remarkable recovery, and may either sustain or improve further.

 

Five key parameters help explain the valuations for telcos in general, and Bharti in particular – Ebitda growth and gross block increase, net debt and ROCE, and AGR (incl. NLD) market share trend. Analysts see very high correlation between Bharti’s enterprise value (EV)/Ebitda valuation progression and performance of five key metrics. Bharti’s EV/Ebitda valuation rerating is supported by a sharp improvement in each of these metrics, and are therefore, completely justified, analysts said.

 

The brokerage firm believes Bharti’s Ebitda growth may slightly moderate on a high base, but gross block increase should materially decelerate as Bharti may need a very small quantum of spectrum; network capex should also moderate according to it. 

 

Bharti is generating a strong free-cash-flow (FCF) which should help accelerate deleveraging, and return ratios may improve further. “In our base case, we expect Bharti’s AGR (incl. NLD) market share to remain stable; however, considering Bharti’s strong incremental AGR (incl. NLD) market share, the probability of more market share gains in future cannot be ruled out. We expect Bharti’s EV/ Ebitda valuations to sustain in base case, but see headroom for further rerating,” analysts said.

 

Meanwhile, the board approved Gopal Vittal (current MD & CEO of Bharti Airtel) moving into the role of Bharti‘s Executive Vice Chairman, and Shashwat Sharma (current COO) replacing him as Bharti’s MD & CEO with effect from January 1, 2026, in a well planned transition to bring young leaders in critical roles to drive the India business, according to analysts at JM Financial Institutional Securities.

 

The brokerage firm maintains 'Buy' on Bharti (unchanged 1-year TP of Rs 1,850 and 3-year TP of Rs 2,400) as analysts believe India wireless business tariff hikes are likely to be more frequent, going forward, given the consolidated industry structure, while the higher average revenue per unit (ARPU) requirement for Jio also justify the significant 5G capex, given Jio’s potential IPO. ARPU growth aided by likely moderation in capex will drive Bharti’s FCF from FY25, enabling it to get to net cash by FY29; this will also aid in accretion in equity value, analysts said.