The brokerage house says that for FY22-24E, Airtel’s EBITDA can grow at 18 percent CAGR. Operational performance remains strong.
Airtel Stock Price: Airtel’s share can prove to be a winner in the telecom sector. The company’s operational performance remains strong and the company has entered the phase of high FCF growth. In the past, the company has increased the tariff several times, which seems to be beneficial and the ARPU of the company has increased. Expressing confidence in the stock, brokerage house Motilal Oswal has expressed the expectation of an upside of 34 percent. The brokerage house says that for FY22-24E, the company’s EBITDA can grow at 18 percent CAGR. The sentiment of the stock is better and this year it has been flat even in the downfall of the market.
strong operational performance
Airtel’s operational performance remains strong and EBITDA growth is good. However, it lags behind in FCF generation and deleveraging, which is a major concern for the stock. FCF is an important factor in the telecom business as technology up-gradation continuously keeps the capex intensity high. However, the brokerage believes that despite the upcoming investment in 5G, Airtel is witnessing a decade-long change in its FCF production capability which could translate into healthy deleveraging. While advising investment in the stock, the brokerage house has set a target of Rs 910. In terms of current price of Rs 681, it can give 34 percent return.
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Airtel in phase of high FCF growth
According to the brokerage report, Bharti Airtel is now entering the phase of high FCF growth. During the last 3 years (FY19-22) Airtel’s EBITDA has increased more than 2 times. Whereas capex has been average. The EBITDA addition in the last 3 years has been 1.4 times the annual capex. However, Indus and DTH stake acquisition, AGR Payments and Liability Limited have been the major factors for FCF and deleveraging. The brokerage house estimates that Airtel will generate around 25100 crores and 36800 crores FCF (post interest) for FY23/24E. This will be 22%/47% of its total debt.
Estimated 18% growth in EBITDA
The brokerage house says that Airtel has recently hiked tariffs in multiple rounds. Which will benefit it. At the same time, the company’s ARPU has increased by 5.3 percent in the market share, increasing by 39 percent during FY19-22. The 4G mix has improved. The brokerage house says that for FY22-24E, the company’s EBITDA can grow at 18 percent CAGR.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
