Bharti Airtel share price plunges 46% in 6 months, should you buy? Stock looks set for 60% rally now

Following a rally of over 9 per cent in the last five sessions, Bharti Airtel shares fell 1.45 per cent to Rs 428.05 apiece on BSE today. Foreign brokerages Citi Research and Berstein have ‘buy’ rating to the stock, with a potential upside of nearly 60 per cent from the previous close. Bernstein has initiated its coverage on this telecom giant and believes that India remains an attractive market opportunity in Telecom. It sees Bharti Airtel as one of the two long term winners. As Bharti Airtel stock has corrected nearly 30 per cent from its 52-week high touch in May this year, the brokerage firm believes that this presents a good entry point to accumulate a quality stock. 

It will take Bharti Airtel stock to jump 38 per cent to hit the target price of Rs 600 pegged by Bernstein. It sees a favourable market structure as India telecom is a consolidating market with Reliance Jio and Bharti Airtel’s 70 per cent share and Vodafone Idea bleeding share. The long term market dynamics are positive with rising ARPU (13% CAGR), still-low user penetration (70%) and low smartphone mix (50%). “We expect further consolidation of the market by 2025 with a revenue share of Bharti Airtel with 31 per cent and Jio 47 per cent,” it said. Bernstein expects the long-term market share of Bharti to remain steady. With Vodafone having challenges, Bharti will be able to consolidate market share and a second position.

Citi Research sees nearly 60 per cent potential upside in Bharti Airtel stock price, with a target price of Rs 690 apiece. Bharti Airtel stock underperformed with a 17 per cent fall in one month, 33 per cent in three months and 46 per cent in six months. The underperformance was further exacerbated with news flow related to Jio’s announcements, AGR relief for Vodafone Idea and tariff hike delay. Citi sees that pessimism in the telecom stock seems to be overdone now. 

Citi Research in its report highlighted that despite an improvement in sector optimism on recent pricing improvement, Airtel remained its only ‘buy’ in Indian telecoms based on its healthier balance sheet than Vodafone Idea, strong execution track record, impressive cost control, a reasonable pipeline of asset monetisation opportunities, and a more diversified earnings stream, which should give it more room to continue to invest in order to stay competitive. The company is better prepared for 4G by having firmly established itself as the number 2 player in terms of coverage. “It is also taking proactive steps to improve its subscriber mix, which should translate into revenue and earnings accretion even in the absence of pricing improvement,” it added. It expects further details on Bharti Airtel’s digital strategy in the coming months and sees the revenue opportunity.

Around 2.45 PM, Bharti Airtel shares were trading 0.56 per cent down at Rs 431.90 apiece on BSE, as compared to a 1.41 per cent fall in the S&P BSE Sensex.

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