Why Brokerages Stay Bullish On Bharti Airtel Despite Smaller Tariff Hike Than Jio

Brokerages maintain positive stance on Bharti Airtel despite having smaller tariff hike than Reliance Jio.

Bharti Airtel’s stock was rising on Monday as brokerages maintained a positive stance on India’s no. 2 telco despite their its tariff hike being smaller than that of rival Reliance Jio

What Happened: Airtel said it will hike tariffs for its prepaid and postpaid customers by around 16% starting July 3 as India’s telecom trinity looks to ramp up average revenue per user (ARPU) over ₹300 for a sustainable business model for the industry.

The hike will be applicable for Bharti Hexacom circles as well. Meanwhile, Reliance Jio hiked prices by 20% for its plans. 

Brokerage Views: Jefferies maintained its "buy" call and raised its target price to ₹1,740 from ₹1,720. The research firm has a healthy growth outlook for the company despite the extent of tariff hikes being slightly below its expectations.

The tariff premiums are increasing for feature phone users but falling for smartphone users, said the brokerage. The brokerage added that the tariff hikes are unlikely to impact the addition of data subscribers. 

Nomura also gave the stock "buy" recommendation with a target price of ₹1,650. As the company hiked tariffs by 13%-21%, the entry level unlimited 5G plans are unchanged for Airtel, the research firm noted. The brokerage said industry outlook remains robust as focus shifts to value creation and monetisation. 

Contrary Opinion: HSBC maintained a "hold" call on the telco and raised its target price to ₹1,325 from ₹1,220 as it believes the stock has already priced in benefits from tariff hikes. The research firm expects the firm’s revenue from Indian to grow 13% yearly over FY24-27 and EBITDA to compound at 14%.

The brokerage also lifted its EBITA estimates by 3%-4% for FY25-27 to reflect the earlier-than-expected tariff hikes. 

Price Action: Shares of Bharti Airtel were up 1.13% at ₹1,460.30 on Monday morning.

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