6 months ago
52
Brokerage JM Financial initiated coverage on Bharti Hexacom Ltd (BHL), which listed at a premium of 32.5% today, with a buy recommendation and a price target of Rs 790. Shares of the company were trading on BSE at Rs 767 on Day 1.
“We expect BHL’s ARPU to grow at 10% CAGR, consisting of two elements: 6-7% ARPU CAGR due to regular tariff hikes; and 3-4% ARPU CAGR due to Bharti Airtel’s premiumisation strategy.” read the report by JM Financial.
The broker further added that BHL’s FY24-26/ FY24-30 EBITDA CAGR could be higher at 17%/15% due to its presence in high growth potential markets as Rajasthan/NE circle has a relatively lower teledensity and a relatively lower penetration of high ARPU post-paid and data subscribers.
India wireless Average Revenue Per User (ARPU) is on a structural uptrend given the consolidated industry, and as industry needs ARPU to rise to INR 275-300 in 3-4 years to meet future capex needs.
BHL provides consumer wireless (mobile), fixed-line and broadband services in Rajasthan and North East circles under Bharti’s brand “Airtel”. BHL serves 27 million wireless subscribers in these two circles; wireless business constitutes 97-98% of its revenue while the balance 2-3% is from broadband business.
Dayanand Mittal of JM Financial states “The stock could potentially double in 3-4 years on the back of 15-17% EBITDA compounding story. We see BHL as a mid-cap pure-play on wireless ARPU growth story vis-à-vis Bharti (which sees 25-30% of its value coming from other than India wireless business).”
“With the consolidation of India’s telecom industry largely complete, we expect the wireless industry’s revenue to grow further, at 11% CAGR, to Rs 3,20,000 by FY26 and Rs 4,60,000 by FY30 Rs 2,25,000 in FY23, due to continued structural uptrend in industry ARPU driven by the industry’s future investment needs,” mentions JM Financial.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
English (US)