Airtel poised to post improved ARPU and revenue growth – analysts remain bullish on the stock

Airtel poised to post improved ARPU and revenue growth – analysts remain bullish on the stock
Airtel chairman Sunil Bharti MittalBCCL
  • Analysts are bullish on the Airtel stock, expecting it to deliver returns of up to 68% in the next one year.
  • The bullish sentiment exists even though the Airtel share price has taken a beating since July, falling by over 23%.
  • The post-lockdown recovery led by workers returning to cities, the trend towards digital and long-term recharges are amongst the factors cited by analysts in their positive outlook.
  • Check out the latest news and updates on Business Insider.
Analysts expect Bharti Airtel to improve its average revenue per user (ARPU) and revenue growth as India continues to ease COVID-19 restrictions in phases. The post-lockdown recovery has led to analysts being bullish on the Airtel stock, with an estimated upside of nearly 68%.

The Airtel stock has taken a beating over the last three months. Factors like promoters selling a part of their stake, MSCI rebalancing, and the missing price hike are amongst the factors which pulled the share price down.

Airtel poised to post improved ARPU and revenue growth – analysts remain bullish on the stock
Airtel share priceBSE / Business Insider India / Flourish

In its report dated October 22, Citi Research stated that the pessimism was overdone and identified three potential catalysts that could send the Airtel share price rocketing to ₹690 in the next 90 days. These factors include market share gains or tariff hikes, recovery in new 4G subscribers, and new digital plans in the near future.

ICICI Securities noted that Airtel’s performance in terms of subscriber additions is ‘underappreciated’. According to its forecast, Airtel added 4 million subscribers, while the telecom industry lost 2.1 million active subscribers.


Post-lockdown recovery to help Airtel weather Q2’s seasonal challenges

Axis Capital noted that despite the second quarter being seasonally weak for the telecom industry, the post-lockdown recovery is likely to help telcos post moderate growth.

The firm ascertained this to four factors:

  1. Pickup in recharges as people return to cities.
  2. More people were stationed in cities in this quarter when compared to the same period last year.
  3. Digital recharges are gaining momentum.
  4. Long-term recharges are becoming increasingly popular.
Q2FY21 Earnings Estimates

Brokerages on Bharti AirtelEstimated EBITDA Estimated Revenue
Axis Capital+3.4%+2.5%
IIFL Securities+1.9%+1.2%
B&K Securities+5.8%+4.6%

Note: EBITDA and Revenue for Q2 FY21 compared with Q1 FY21.

‘Tariff no barrier’

Other analysts suggest that even in the absence of tariff hikes, Airtel will likely outperform.

“Even in case of no hike, Bharti’s superior network and rising ARPU premium will propel market share gains, creating long-term value,” Edelweiss Research said in its report dated October 23.

“A delay in tariff hikes and/or in VI’s capital raise should imply continued RMS gains for Bharti,” said Citi Research, noting that Airtel will likely benefit even if tariff hikes are delayed.

Analysts bullish on Airtel, give it a ‘outperform’ rating

Several major analysts are bullish on Airtel with a ‘BUY’ recommendation. The maximum upside is as high as 68% compared to the market price of ₹434.05 as of October 26, 2020.

Brokerage firmTarget PriceUpsideRecommendation
B&K Securities₹72568%BUY
Citi Research₹69060%BUY
Motilal Oswal₹65051%BUY
Bernstein Research₹60039%BUY
Edelweiss Research₹58937%BUY
IIFL Securities₹57734%BUY
Axis CapitalNot available>15%BUY


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