Motilal Oswal Recommends This Telecom Stock To ‘Buy’ With +21% Returns In 1 Year

Target price

The current market price (CMP) of Bharat Airtel is ~ Rs. 713, and According to Motilal Oswal, the target price (TP) for this stock should be Rs. 860. Hence, it will give a return of +21% in 1 year. The firm says this company has reported steady growth, and they are gaining market share. The brokerage firm has rated this stock as ‘Buy’.

Company performance

Bharati Airtel has posted strong Q2FY22 results, with consolidated EBITDA up 6% QoQ, to Rs. 138.1b (which has been above Motilal Oswal’s estimate) on India Mobile/Africa EBITDA growth of 6%/5%, led by a 5% increase in India Mobile ARPU. Bharati Airtel’s Consolidated revenue grew 5.5% QoQ to Rs. 283.2b on strong performance across segments, particularly the India business. Their reported net profit also stood at Rs. 11.3b. The brokerage firm said, “It expects 20% consolidated EBITDA CAGR over FY21- 23E, along with tariff/consolidation to drive FCF/deleveraging. We maintain our Buy rating.”

Motilal Oswal’s estimation

Motilal Oswal, maintaining a ‘Buy’ rating on the company’s stock said, “We see the potential for a re-rating in both the India and Africa businesses on the back of steady earnings growth. We value Bharti on a Sep’22E basis, assigning an EV/EBITDA of 11x/5x to the India Mobile/Africa business, arriving at an SoTP based TP of Rs. 860. Our estimates do not factor in any upside from a tariff hike or steep market share gains from VIL’s financial stress.”

However, Motilal Oswal, also mentioned the company’s negative points by mentioning, “High Capex and spectrum spend limiting FCF growth/deleveraging: Capex continued to increase to Rs. 70b (Rs. 135.6b/ Rs. 241b in 1HFY22/FY21). FCF, post interest, grew to Rs. 22b (v/s INR17b QoQ), although this is much lower than the company’s potential. Along with an Rs. 105b increase in deferred spectrum liability, this has increased net debt by Rs. 48.3b to Rs. 1,313b.”

Disclaimer

The above stock is picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.