This telecom stock can make you rich: Expected to rise by 51 pct, experts give buy rating

The telecom service provider Bharti Airtel has been involved in some mergers and acquisitions recently. Last week itself Airtel completed the amalgamation of its Bharti Digital Networks known as Tikona Digital. The acquisition of Tikona involved 350 sites across five circles for some Rs 1,600 crore. Later, Airtel also announced to acquire Indian Continent Investment through its Bharti Telecom. Currently, Airtel’s overall customer base stands at 404 million across 16 countries. During its Q4FY19 result, the company saw slight improvement in net profit to Rs 107 crore against Rs 83 crore in the corresponding quarter last year. Meanwhile, mobile data traffic grew to 3,836 Bn MBs in the quarter; growth of 137%Y-o-Y. Now, Airtel is seen as a money making stock on Dalal Street, so much that experts have given their buy rating on the company. In fact, the gains are seen to nearly 51% from Airtel. 

On Monday, the share price of Airtel was trading at Rs 351.15 per piece up by 0.76% on Sensex at around 1320 hours. The company has also touched an intraday high and low of Rs 355.65 per piece and Rs 349.10 per piece respectively. 

Taking into consideration recent analysts meet with company, Aliasgar Shakir and Hafeez Patel, Research Analysts at Motilal Oswal said, “(1) Management mentioned that peak capex levels are now behind; FY20 capex should see some moderation. (2) Airtel Thanks with an array of services like entertainment, music, financial services, etc. should drive ARPU. (3) Evaluating all possible opportunities for monetization of Bharti Infratel stake.”

"With a large portfolio of sites and spectrum, capex intensity has passed its peak according to management. We have subsequently built about INR245b capex in FY20 v/s INR287b in FY19. We believe, this should significantly support improvement in current negative FCF* situation – FY19 at INR104b," the duo added.

On stock price, Motilal Oswal’s analysts added, “We have largely maintained our revenue/EBITDA estimates. We believe that Bharti is on course to reach self-sufficiency in terms of FCF with series of fund raising from the rights issue, Africa IPO and Bharti Infratel stake sale, coupled with lower capex and stable EBITDA. This would allow it to maintain a foothold in the industry despite the hyper-competitive market conditions, and remain well-poised to benefit as industry ARPU revives over the next 3-4 quarters.” Buy rating along with a target price of Rs 405 is set on Airtel.

Interestingly, Ravi Menon and Ashish Agrawal, analysts at Elara Capital said, “Management confirmed a bulk of capex over FY18-19 was toward optic fiber rollout to connect towers, and peak capex is behind it. We continue to expect elevated access charges, with the new minimum tariff strategy encouraging correction of traffic asymmetry, the positive effects of which will be visible only in FY21. We expect debt reduction to be pushed out, as monetization of Bharti Africa and Bharti Infratel is likely only toward 2HFY20 or later. We reiterate Buy with a new TP of INR 530 from INR 510 based on 6.5x (unchanged) FY21E EV/EBITDA adjusted for minority holding in Bharti Infratel.”