Airtel’s market share gains likely to continue, says Nomura, shares may rally over 16%, check target price

Bharti Airtel share price may rally on account of company’’s market share increase in the near future. According to analysts at Nomura, without significant fund-raising, Vodafone Idea’s network investments and 5G rollout would likely remain constrained, at least in the near term. Hence, market share gains are expected to continue for Bharti and Reliance Jio. Additionally, Bharti Airtel’s ARPU is also likely to get a boost from the conversion of non-data subs to data subs. Despite the recent market correction, Bharti Airtel stock has risen 2.01 per cent in the last one month and over 26% in the past year, and going forward, the stock may rally over 16% in 12 months. Bharti Airtel shares were trading down 0.52% on Monday at Rs 709 on BSE.

Subscribers: Bharti’s market share gains

Bharti Airtel added half a million wireless subscribers m-m (+1.3/ +2.4 mn for 3Q/2Q) to further increase market share by 41bp on-quarter to 30.8%, according to the international brokerage report. However, Bharti Airtel’s net overall subscribers declined in the December quarter. Subscribers are believed to have been declined on account of tariff hikes. Nomura in an earlier report, however, focused on the subscriber mix, which they said has improved. “We note that, despite a 0.6mn decline in reported wireless subs, Bharti Airtel added 0.3 million net post-paid subs (+10% yoy) and 3 million net 4G data subs. Around 61% of subs are now using 4G data against ~54% on-year.

Bharti Airtel ARPU healthy

During the same quarter, Bharti Airtel’s Average Revenue Per User (ARPU) increased to Rs 163 as against Rs 146 a year ago. Analysts at Nomura highlighted that Bharti Airtel ARPU increased 5.9% on-quarter basis while that of Reliance Jio and Vodafone Idea improved by 3.3% each. “Among the three private telcos, Bharti’s revenue and subscriber market share inched up by 65bp and 45bp q-q, respectively, on our estimates,” the brokerage said.

Key Downside risks:

While Nomura expects market share gains to continue for Bharti Airtel and for the stock to rally, a few downside risks include higher-than-expected competitive intensity, leading to delays in tariff hike and/or escalation in 5G spectrum/ network expenses; adverse regulatory outcome on One Time Spectrum Charges (OTSC) and any other dispute, leading to higher regulatory payouts to GoI; higher- and quicker-than expected fund raise by Vodafone Idea; higher-than-expected subscriber churn; lower growth in Homes, Enterprise and/or Africa business; and significant investments in non-core assets.

Rating: BUY
Target price: Rs 855

Analysts at Nomura have a ‘buy’ rating on Bharti Airtel stock with a target price of Rs 855. “In our view, Bharti’s rights issue, strategic tie-up with Google, cashflow relief from the moratorium on government dues, along with Rs 200 billion+ in annual free cash flow generation over FY21-25F, not only alleviate debt concerns but also ensure that Bharti would be well-placed to compete with Reliance Jio,” they said.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)