Bharti Airtel’s market share gains among 4G subscribers, hikes in voice tariffs and improving tariff outlook due to Govt’s support for Vodafone Idea Ltd (VIL_ should help Bharti drive 13% growth in its mobile ARPUs over FY23-25, said global brokerage Jefferies which believes that market share gains are likely to accelerate amid 5G rollouts.
“While we cut our estimates by 1-4% to factor tariff hike delays, we upgrade Bharti Airtel shares’ rating to BUY as, after a 13% fall since November 2022, the stock offers 16% upside potential to our rolled forward target price of ₹900 (earlier ₹850).
“We cut our revenue/EBITDA estimates by 1-4% to factor the change in tariff assumptions and expect 16-17% Cagr in Bharti Airtel’s consolidated revenue/Ebitda over FY23-25,” the note stated.
Bharti has seen an acceleration in market share gains among active 4G users, evident from its 60% incremental market share in 2HCY22 vs its overall market share of 30%.
This has helped Bharti Airtel improved its subscriber mix and raise its daily ARPU by 4.4% over 2HCY22. With another 107m voice subscribers on its network yet to upgrade to data, Bharti’s ARPUs will likely rise by 4-5% annually due to the improvement in subscriber mix, it added.
Given this, Jefferies has upgraded Bharti to BUY with target price of ₹900 offering 16% upside and implies exit multiple of 7.6x EV/EBITDA – in line with 10-yr averages. Delayed tariff hike is the key risk to its recommendation.
“VIL may potentially be able to secure incremental funding given Govt’s support but this is unlikely to match Bharti/Jio’s capex plans of $9/25bn over the next three years. Furthermore, VIL is likely to witness accelerated market share losses as 5G becomes mainstream. Initials signs are already visible in recent market share trends where in VIL has lost 3 ppt market share in metro circles in 3QFY23. Per our calculations, Bharti’s fair value could rise by ₹120/share in a duopoly,” it added.