The Shares of this Telecom company gained 9% to an intraday high of ₹877 apiece on Tuesday after global research and broking firm Jefferies gave a ‘buy’ recommendation with an upside of 27 percent
At 12:35 p.m. on Tuesday, Bharti Hexacom Ltd. shares were trading on the National Stock Exchange at ₹855.20, marking a 6.11% increase from the previous closing price. The company’s market capitalization stands at ₹42,670 crore.
Bharti Hexacom Limited provides fixed-line telephone and broadband services to customers in Rajasthan and North East telecom circles.
The company leads in Rajasthan and the Northeast with significant market shares. In Rajasthan, it holds around 40.4% of the revenue market and 35% of the customer market, while in the Northeast (including Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura.)
Bharti Airtel, led by Sunil Mittal, holds a majority stake of 70% stake in the company, equivalent to 35 crore shares. The company possesses a diverse mid-band spectrum portfolio, empowering us to deliver advanced 5G+ services to our customers.
Since its listing on April 12, 2024, the company’s shares have surged by approximately 12%. In the fiscal year 2022-23, the company witnessed a 22% rise in revenue, reaching ₹6,579 crore compared to ₹5,405 crore in FY21-22. However, the net profit saw a decline of 67%, dropping from ₹1,675 crore to ₹549 crore during the same period.
Based on a strong outlook on Bharti Hexacom Ltd., a global research and broking firm, Jefferies has initiated a target price of ₹1,080, representing a 27 percent increase from Tuesday’s trading price of ₹853 per share.
Jefferies suggests that Bharti Hexacom provides an opportunity to capitalise on the rapidly growing segments of Bharti Airtel’s business. This business segment aims to demonstrate higher returns on capital employed (ROCE) but also exhibit superior free cash flow (FCF) conversion rates.
The foreign brokerage forecasts a 16% revenue CAGR (compound annual growth rate) from fiscal year 2024 to 2027 and anticipates a 21% EBITDA CAGR for the same period.
Jefferies noted that the Compound Annual Growth Rate (CAGR) in revenue and EBITDA, along with reduced capital expenditures, is expected to lead to a 40% CAGR in Free Cash Flow (FCF).
Additionally, Bharti Hexacom’s robust cash generation is projected to facilitate a reduction of ₹5,500 crore in debt (equivalent to 14% of market capitalization) and lower the net debt to EBITDA ratio to 0.4 times by FY27. This could potentially enhance dividend distributions.Brokerage mentioned.
Written by Omkar Chitnis
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