Brokerage firm CLSA in its latest note has maintained a positive view on the shares of a fundamentally strong stock in the telecom sector. It forecasts strong subscriber additions in the 4G/5G segment, market share gains and further improvement in average revenue per user (ARPU) due to rising postpaid subscribers.
Bharti Airtel’s shares were trading at ₹ 887.40 apiece on the National Stock Exchange (NSE) on Tuesday. CLSA has a buy rating on the stock with an SOTP-based target price of ₹ 1,100. This translates to an upside of 24 percent as compared to its share price.
CLSA said that acceleration in post-paid subscriber additions may contribute another 7-10 per cent rise in ARPU for the company. Besides, 4G and 5G subscriber additions remained strong at 2.45 crore in the last 12 months and CLSA anticipates 2 crore in annual 4G/5G upgrades by FY26, which, it says, may contribute to a 30 per cent jump in ARPU to ₹ 257 by FY26 from ₹ 200 at present.
Bharti Airtel’s revenue market share stood at 36.7 per cent in the June quarter. As per the brokerage, the company’s market share has increased by 5 percent in three years. It added that Bharti Airtel’s latest share gains have been led by B and C circles while it leads in metros and A circles/markets.
“Our forecast of ₹ 257 ARPU by FY26 implies 20 per cent cumulative tariff hike and a 2 per cent share gain to 38 per cent by FY26CL. If tariff hikes are delayed beyond FY26, Bharti with 50m additional subscriber addition may still reach our forecast,” CLSA said.
The brokerage added that Airtel’s 4G/5G subscriber net additions remain strong at 56 lakh in the June quarter and 2.45 crore in the last 12 months. The company currently has 23 crore 4G/5G subscribers, which is a 70 per cent penetration of its own 33.90 crore total mobile subscribers.
Meanwhile, Sunil Bharti Mittal said that Africa continues to offer vast potential for growth – much like how India was 15-20 years ago. He assured that even Aritel was witnessing an annual growth of 20 per cent in its African operations and that he is bullish on Africa and would continue to invest.
With a market capitalization of ₹ 5,16,748 crores, Bharti Airtel is a large-cap company. It has a low return on equity of 12.43 percent and a dividend yield of 0.44 percent. Its shares were trading at a price-to-earnings ratio (P/E) of 59.55, which is higher than the industry P/E of 43.64, indicating that the stock might be overvalued as compared to its peers.
The company’s promoters hold a 54.97 percent stake in it, followed by foreign institutions with a 21.48 percent stake, mutual funds with 11.06 percent, domestic institutions with 6.99 percent and retail investors with a 5.50 percent stake.
Written by Simran Bafna
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