Buy Bharti Airtel With A Target Price of Rs. 920 Says Motilal Oswal

Motilal Oswal has suggested buying the stock of Bharti Airtel Limited with a target price of Rs. 920 resulting in a gain of +24% from the current market price of Rs. 742. The brokerage claims that the effective tariff hike of #126;20% in prepaid plans is expected to contribute incremental revenue/EBITDA of INR103b/INR72b, thereby. Motilal Oswal in its research report has said that On 22nd Nov21, Bharti announced a 20% price hike, effective 26th Nov21, across its prepaid plans, which contributes 85% to India Mobile revenue (15% is postpaid). The tariff hike comes nearly eight quarters from its last hike (Dec19), even as industry participants have been calling for the same since the last 12 months. With a 20% increase in prices and expected ARPU at INR181, we expect incremental revenue/EBITDA contribution to its India Mobile business to be INR103b/INR72b, i.e. 16%/22% growth, which works out to a 13% growth in consolidated EBITDA on 2QFY22 annualized basis. On an FY24E basis, we revise higher our consolidated EBITDA estimate by 10% to INR821b. The brokerage has further claimed that Bhartis consolidated EBITDA (2QFY22 annualized) after capturing the 20% tariff increase would be INR624b. Adjusting for CAPEX, interest, tax, and Ind AS 116, it would be ~INR200b, thus implying a 5% FCF yield. It has the potential to grow EBITDA by more than 20% over the next two years on the back of mix-led ARPU improvement and subscriber additions. It does not factor in an additional 13% EBITDA opportunity due to potential market consolidation over time, leaving additional growth levers.Advertisement Motilal Oswal in its research report has reported that Without capturing market share gains, the stock is trading at 7x consolidated EBITDA on a one-year forward basis, while the implied India business is trading at 8.5x. This doesnt capture an additional 13% EBITDA opportunity from market consolidation and the re-rating potential due to an improving FCF/RoCE profile. We expect 24% CAGR in consolidated EBITDA over FY21-24E on the back of 31% CAGR in Mobile India EBITDA, aided by ARPU growth as a result of the tariff hike. According to the brokerages call We see potential for a re-rating in both the India and Africa business on the back of steady earnings growth. We value Bharti on a Sep23E basis, assigning an EV/EBITDA of 10x/4x to the India Mobile/Africa business, arriving at a SoTPbased TP of INR920. We maintain our Buy rating. The stock has been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.