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Shares of Bharti Airtel (Airtel) surged 5 per cent on BSE to a fresh high of Rs 1,136 in Friday’s intra-day trade amid hopes of a strong year.
Analysts expect 2024 to be robust for the telecom industry with a mid-year tariff hike and moderation in capex.
At 01:47 pm, Airtel was up 3.3 per cent at Rs 1,123 as compared to a 0.7 per cent gain in the BSE Sensex. In the past one month, the stock has rallied 15 per cent against a 0.32 per cent rise in the benchmark.
In the last two years, Airtel has increased its investments as it expanded its rural coverage and rolled out 5G in urban markets.
With peak capex behind, analysts at BNP Paribas expects annual capex to decline year on year (YoY) in FY25.
The brokerage expects the telecom industry's revenue growth to remain in double digits over FY23-26, led by tariff hikes and customers upgrading to bundled plans.
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“We expect Airtel to gain market share as VIL's revenue market share continues to shrink. In FY25, we expect strong EBITDA growth, helped by tariffs hikes and moderation in capex. These factors will boost FCF generation and help deleverage the balance sheet,” they said in a note.
The brokerage has a ‘outperform’ rating on Airtel with a target price of Rs 1,265 per share.
It expects the telecom Industry to end 2023 with 9 per cent YoY revenue growth despite stable tariffs with Airtel and Jio outpacing industry growth.
Operators raised tariffs in 2019 and 2021 and some experts expect tariff hike in mid-2024 after the general elections.
During the last five years, industry growth has been 18-20 per cent in years with tariff hike and 9-12 per cent in years with stable tariffs, which is stronger than growth seen in other mass consumption categories, as per BNP Paribas.
From a long-term perspective, Axis Securities believes Bharti Airtel would continue to gain market share backed by the highest penetrations and with minimum Capex requirements.
With a stronger digital portfolio supported by rising per-user data, the brokerage is positive on Airtel's growth. The stock is trading close to its target price of Rs 1,155 per share.
"The management foresees huge potential for continued strong revenue and profit growth, supported by expanding distribution in rural areas, investments in the network, and increasing 4G coverage. Strategic investment opportunities are available in tower sales, minority and IPO investments in mobile money", it had said in Q2 result update.
