It is up just 3 per cent year to date compared with a nearly 11 per cent rise in the Sensex. Its peers have also underperformed. Vodafone Idea is down 13 per cent while Jio-operator Reliance Industries is up 8 per cent for the year.
Bharti Airtel’s underperformance has come at a time when telecom connectivity has become more important for people working from home and students taking online classes amid Covid curbs on movements.
S Naren, Chief Investment Officer at ICICI Prudential Mutual Fund, finds it fascinating. “Even in the connected world, the telecom sector is the worst performing one. That is the beauty of the stock market. It’s very fascinating to see how the market delivers returns,” Naren said.
“That’s when one sector that many thought will not deliver in a riskier world has outperformed,” Naren said, alluding to the metal stocks.
It is not as if Bharti Airtel’s business has suffered. The company is in a neck-and-neck race with Mukesh Ambani’s Jio for the market leadership slot in telecom. It is set to gain the most if Vodafone can’t get its house in order soon enough. Its Africa business and broadband satellite internet venture OneWeb are also on track.
What seems to be really dragging Airtel is its inability to take a tariff hike, which many had been anticipating. The highly competitive nature of the industry has forced the company to take a pause on tariff hike and look, instead, at other options to raise revenue.
This has not discouraged analysts, many of whom are still hopeful that the stock will eventually deliver. The 12-month price target for the stock for some analysts stands at a high Rs 730, suggesting a solid 40 per cent upside from its current level.
Deepti Chaturvedi of CLSA says Airtel’s Africa business will be a growth driver. Airtel Africa’s revenue rose 15 per cent last quarter while Ebitda grew 25 per cent. Moreover, the company has unlocked value in Mobile Money, by selling a 12 per cent stake.
Navin Killa of UBS says Airtel has consistently outperformed Jio on most metrics, which should work in its favour. “However, the impact of the second wave of Covid-19 on subscriber additions and Arpu will be a key monitorable going ahead. We believe Bharti is well placed,” he said.
Lately, Airtel has lagged Jio in consumer addition; the former added a net of 4.06 million wireless users in March against the latter’s 7.92 million, Trai data showed. Voda Idea, the third player, added 1.09 million. The data for April through June is not available yet.
But other businesses are making up for Airtel’s slower subscriber additions. Sanjesh Jain of ICICI Securities said its under-appreciated businesses are creating value. Bharti has expanded its market share across businesses and has been investing in a network that should continue to aid market share even in FY22.
“In the March quarter, the telco achieved mobile revenue growth of 19% and Ebitda expansion of 32% YoY without any tariff hike, which is commendable,” said Jain, who has however cut her price target for the stock to Rs 675 from Rs 723, accounting for a six-month delay in tariff hike.
Technical analysts say the stock is likely to move in a range for some time.
“Bharti Airtel is in a sideways consolidation. The lower support stands at Rs 518 and the higher one at Rs 580. Bharti is likely to rest within this zone for the next few weeks. Below Rs 518, a strong demand zone can be seen around Rs 480 level,” said Vishal Wagh, Research Head of Bonanza Portfolio.
