Motilal Oswal has given Buy recommendation for Bharti Airtel recommended buy rating on the stock with a target price of Rs 860 in its research rep with a target price of Rs. 860 in its research report issued on Nov 04, 2021
Motilal Oswal’s research report on Bharti Airtel
Bharti posted a strong 2QFY22, with consolidated EBITDA up 6% QoQ (above our estimate) on India Mobile/Africa EBITDA growth of 6%/5%, led by a 5% increase in India Mobile ARPU. This has continued to drive FCF, post interest, despite higher capex. The only dampener was the steady rise in net debt, which should fall with rising FCF and proceeds from the rights issue. The management is making the right noise in terms of steady market share gains, premiumization, cross selling through digital initiatives, and healthy inroads in non-Mobile revenue streams like payments bank, Home, and Enterprise segments. It expects 20% consolidated EBITDA CAGR over FY21-23E, along with tariff/consolidation to drive FCF/deleveraging. We maintain our Buy rating.
We see 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 INR860. Our estimates do not factor in any upside from a tariff hike or steep market share gains from VIL’s financial stress. We maintain our Buy rating.