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Bharti Airtel Expected to Continue to Gain Market Share, Stock May Rebound 16%, Says Nomura; check target price

Bharti Airtel stock has risen 2.01% in the past month and more than 26% in the past year, and looking ahead, the stock may rise more than 16% in 12 months.

Bharti Airtel share price may recover due to the increase in the company’s market share in the near future. Investments in Vodafone Idea’s network and 5G rollout would likely remain limited, at least in the short term, without a significant fundraising, Nomura analysts said. Hence, market share gains are expected to continue for Bharti Airtel and Reliance Jio. Additionally, Bharti Airtel’s ARPU is also likely to be boosted by the conversion of non-data subscriptions to data subscriptions. Despite the recent market correction, Bharti Airtel stock has risen 2.01% in the past month and more than 26% in the past year, and going forward, the stock may rise further. 16% in 12 months. Shares of Bharti Airtel fell 0.52% on Monday to Rs 709 on BSE.

Subscribers: Bharti Airtel’s market share gains

Bharti Airtel added half a million wireless subscribers month-on-month (+1.3/+2.4 million for 3Q/2Q) to further increase its market share by 41 basis points quarter-over-quarter to 30.8%, according to Nomura. However, Bharti Airtel’s total net subscriber numbers fell in the December quarter, likely due to tariff hikes. Nomura in a previous report, however, focused on the subscriber mix, which they said has improved. “We note that, despite a decline of 0.6 million reported wireless subscribers, Bharti Airtel added 0.3 million net postpaid subscribers (+10% YoY) and 3 million net subscribers 4G data. Around 61% of subscribers now use 4G data compared to around 54% year-on-year.

Bharti Airtel Healthy ARPU

During the same quarter, Bharti Airtel’s average revenue per user (ARPU) rose to Rs 163 from Rs 146 a year ago. Nomura analysts pointed out that Bharti Airtel’s ARPU increased by 5.9% on a quarterly basis, while that of Reliance Jio and Vodafone Idea improved by 3.3% each. “Among the three private telecom operators, Bharti’s revenue and subscriber market share increased by 65bp and 45bp qq, respectively, according to our estimates,” the brokerage said.

Main downside risks

While Nomura expects market share gains to continue for Bharti Airtel and the stock to recover, a few downside risks include higher than expected competitive intensity leading to delays in fare hikes and/or increased 5G spectrum/network spending; an adverse regulatory outcome on one-time spectrum charges (OTSC) and any other disputes, resulting in higher regulatory payments to the Government of India; fundraising higher and faster than expected by Vodafone Idea; higher than expected subscriber churn; lower growth in the household, business and/or Africa sectors; and significant investments in non-core assets.

Bharti Airtel Stock Rating: BUY
Target price: Rs 855

Nomura analysts have a ‘buy‘ rating on Bharti Airtel stock with a target price of Rs 855. billion+ annual free cash flow generation in FY21-25F not only mitigates problems leverage, but also ensures that Bharti would be well placed to compete with Reliance Jio,” they said.

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