Shares of Bharti Hexacom were gaining in the bourses on Friday after global brokerage Citi initiated coverage on the stock with a bullish stance.

What Happened: Citi initiated coverage of Bharti Hexacom with a “buy” recommendation and a target price of ₹1,405.

The brokerage sees the company as a pure-play regional telecom operator with a healthy balance sheet. Bharti Hexacom is projected to achieve a three-year EBITDA growth of 26%, compared with a 20% growth of Bharti’s India operations and a 22% growth for Bharti’s mobile operations. Meanwhile, the brokerage sees its peer, Vodafone Idea, growing by 24%.

This growth trajectory is projected to lead to a significant reduction in the net debt to EBITDA ratios, which it anticipates will fall to 0.9 times by FY26 and further decrease to 0.3 times by FY27, primarily driven by the company’s strong free cash flow generation, Citi noted.

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As Bharti hexacom’s net debt to EBITDA ratio continues to decrease, Citi expects favorable conditions for increased payouts, enhancing shareholder value and offering more opportunities for financial returns.

For the overall telecom sector, Bernstein estimates a favourable market structure going forward, driven by consolidation over the years.

Reliance Jio and Bharti Airtel, with market shares of 45% and 37%, respectively, continue to be strongest players in the industry, the brokerage said. Bernstein sees Jio on the path to achieve nearly 500 million subscribers and capture a 50% market share. It anticipates further market consolidation as Vodafone Idea’s subscriber churn stays high.

Bernstein had an “outperform” call on the stock with the target price raised to ₹1,740.

Price Action: Bharti Hexacom rose 5.7% to ₹1,242.20 on Friday morning.

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