Synopsis:
HSBC projects a strong outlook for India’s telecom sector, highlighting potential tariff hikes and robust growth drivers for Bharti Airtel and Reliance Jio, while expressing concerns over Vodafone Idea’s performance.
HSBC maintains a “Buy” rating on Bharti Airtel and upgrades Reliance Industries (target Rs. 1,750). Vodafone Idea is downgraded to “Reduce” due to heavy debt and competitive pressures.
With market capitalization of Rs. 11,62,534 cr, the shares of Bharti Airtel Ltd are currently trading at Rs. 1,935 per share, from its previous close of Rs. 1,941.30 per share.
With market capitalization of Rs. 19,15,250 cr, the shares of Reliance Industries Ltd are currently trading at Rs. 1,414.50 per share, from its previous close of Rs. 1,413.80 per share.
With market capitalization of Rs. 85,158 cr, the shares of Vodafone Idea Ltd are currently trading at Rs. 7.87 per share, from its previous close of Rs. 7.77 per share.
Target & Rationale
HSBC has provided an optimistic outlook on India’s telecom sector, especially favoring Bharti Airtel and Reliance Jio. It highlights that the probability of a tariff hike in 2026 has risen, which could potentially strengthen the balance sheets and profitability of leading telecom players. This suggests an improved revenue environment for the sector, especially if companies are able to pass on higher costs to consumers, cushioning margins and aiding in financial stability.
The analysis also underlines that growth drivers for Airtel and Jio remain robust. These drivers include the expansion of user bases, increasing demand for high-speed home broadband, and continued ARPU (average revenue per user) growth. HSBC notes that these trends will likely push up free cash flow (FCF) and dividends for leading telecoms, making the sector attractive for income-seeking investors.
In terms of stock recommendations, HSBC maintains a “Buy” call on Bharti Airtel, with a target price of Rs. 2,200 per share with an upside percentage of 13.6 from current price, and also upgrades the target price for Reliance Industries from Rs. 1630 to Rs. 1,750 per share, upside 23% from the current levels, reflecting confidence in strong fundamentals and future growth. However, Vodafone Idea faces challenges, HSBC assigns a “Reduce” rating with a target price of only Rs. 5.80 per share, downgraded by 26% from the current levels, signaling concerns over its ability to compete and generate sustainable returns amidst sector consolidation and heavy debt.
Written by Manideep Appana
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