Shares of Bharti Hexacom, a wholly-owned subsidiary of telecom major Bharti Airtel, rallied over 8 per cent in Tuesday’s trade after global brokerage firm Jefferies initiated coverage on the stock with a ‘Buy’ rating and a price target of Rs 1,080, citing strong growth outlook and healthy margin expansion.
The bullish comments led to a nearly 9 per cent spike in the share. At 9.44 am, Bharti Hexacom was trading at Rs 869.85 on the NSE.
Going by Jefferies’ target price, those who invested in Bharti Hexacom IPO can almost double their money from the issue price of Rs 570 if they stay with the counter for a year.
According to Jefferies, Bharti Hexacom represents a strong investment opportunity in the Indian telecom sector. It allows investors to capitalise on the segments of Bharti Airtel’s business that are experiencing faster growth, higher return on capital employed (RoCE), and better free cash flow (FCF) conversion rates, the brokerage stated.
The foreign brokerage forecasts a 16 per cent compound annual growth rate in revenue and a 21 per cent CAGR in EBITDA from FY24 to FY27. This growth, coupled with a reduction in capital expenditure, is expected to lead to a 40 per cent CAGR in FCF, Jefferies said.
It also expects Bharti Hexacom’s robust cash generation to facilitate debt reduction of Rs 5,500 crore (equivalent to 14 per cent of market capitalisation) and contribute to lowering the net debt to EBITDA ratio to 0.4 times by FY27, potentially leading to increased dividend payouts.
Bharti Hexacom is a communications solutions provider offering consumer mobile services,fixed-line telephone, and broadband services to customers in the Rajasthan and the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.
The company has a spectrum portfolio with a varied pool of mid-band spectrum, which has enabled us to offer 5G plus services to customers.
Sunil Mittal-driven telco Bharti Airtel holds a 70 per cent stake or 35 crore shares in the company.
Shares of Bharti Hexacom had debuted on the bourses on April 12 this month at a 32 per cent premium to its issue price of Rs 570. The stock settled 0.74 per cent lower at Rs 807.30 apiece on the NSE on Monday.
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