India is now the second-largest telecommunications market globally, with a subscriber base of 1,203.69 million as of May 2024, showing strong growth over the past decade. The Indian mobile economy is growing quickly and is expected to make a substantial contribution to the country’s GDP, according to a report by the GSM Association in collaboration with Boston Consulting Group.
Price Action
The shares of Bharti Hexacom Ltd, with a total market capitalization of Rs 73,000 Crores, closed at Rs 1,460 per share on Tuesday, which was 9.3 percent higher than the previous closing price of Rs 1,335.5.
Bharti Hexacom stock made its debut in the market in April 2024. As of Tuesday’s closing price of Rs 1,460 per share, the stock has soared 156 percent against its issue price of Rs 570.
Brokerage Target
The Brokerage firm Motilal Oswal has a bullish stance on Bharti Hexacom’s Stock and sets a target price of Rs 1,625 per share, which implies a potential upside of 11 percent from the current levels.
Brokerage Rationale
Motilal noted that Bharti Hexacom offers focused exposure to Airtel’s two high-growth sectors: India wireless and home broadband.The Brokerage stated that due to lower teledensity and internet penetration in Hexacom circles, that is, Rajasthan and the North East, compared to pan-India, Hexacom can potentially grow faster than its parent company, Airtel, on both Subscribers and Average Revenue Per User (ARPU).
Due to lower competition in Hexacom’s Circles, the company has better pricing power and lower customer acquisition costs, which helps in boosting its margin. The Brokerage firm is optimistic that due to significantly lower penetration of fixed broadband in Hexacom’s circles and the recent growth of fixed wireless access (FWA) offerings, Hexacom’s broadband business could also grow at a faster rate.
The brokerage firm highlighted that Hexacom’s circles account for nearly 6 percent of India’s GDP and around 7 percent of India’s population. But the wireless telephony penetration in Hexacom circles is a few percentage points lower than pan-India levels. It added that Internet penetration (both wireless and fixed broadband) is also lower than pan-India levels; this provides growth opportunities through higher subscriber growth, ARPU improvements, and non-data-to-data upgrades.
Motilal Oswal said, “Bharti Hexacom is the market leader on ARPU in both its circles, benefiting from tariff repair and also a significant improvement in its data subscriber proportion to nearly 76 percent by nine months of FY25 from nearly 56 percent in FY21”. Motilal Oswal stated, “Given Bharti’s outperformance over RJio for the past several quarters, we expect Bharti Hexacom to become the Revenue Market Share (RMS) leader in its circles by the end of FY25.”
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Brokerage’s Valuation
Motilal anticipates an EBITDA CAGR of approximately 23 percent for Hexacom from FY24- 27, fueled by a nearly 13 percent growth in wireless ARPU, driven by a Rs 50 per month increase in the base plan starting December 2025.
The brokerage also highlighted that continued market share gains, nearly 75 percent incremental margins, and the expansion of FWA (fixed wireless access) services due to the lower penetration of home broadband in Hexacom’s circles will further support EBITDA growth.
Financials
The shares generated a 25 percent YoY growth in Revenue from Operations from Rs 1,801 Crore in Q3FY24 to Rs 2,251 Crore in Q3FY25. Their Net Profits grew by 52 percent YoY from Rs 213 Crore to Rs 261 Crore over the same period.
About Bharti Hexacom
Bharti Hexacom Ltd provides mobile, fixed-line, and broadband services under the Airtel brand in Rajasthan and the North East regions of India. The company is a subsidiary of Bharti Airtel Limited, offering a range of telecommunications services to both consumers and businesses.. It operates through mobile and home/office services segments, offering voice, data, and digital solutions.
Written By Adhvaitha Nayani
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