Bharti Airtel's Moderating Capital Expenditure Bodes Well For ARPU: Jefferies

Bharti Airtel Ltd. is set to benefit a favourable pricing environment, benign competitive intensity and moderating capital expenditure.

The stock is also set to benefit from the company's focus on quality subscribers and a favourable business environment, according to Jefferies India.

"We believe that Bharti Airtel's focus on quality subscribers bodes well for its average revenue per user," the March 20 note reads.

The brokerage maintains a 'buy' rating on Airtel with a target price of Rs 1,300 per share, implying a potential upside of 5%.

In its takeaway from the management meeting, Jefferies said the telecom major highlighted its focus on driving a steady, organic increase in the ARPU through improving subscriber mix and better monetisation. However, higher tariffs will be key for 5G monetisation and improving the returns on capital employed.

While the management is confident of a further tariff repair, the timing and the quantum of the hikes will be dependent on the competitive intensity in the sector, according to the brokerage.

The management had highlighted that the capex would peak in the current financial year and start moderating from the next. Airtel has not firmed up any dividend or buyback policy and may not need the remaining proceeds from the rights issue at this point, Jefferies said.

Airtel's stock rose as much as 0.9% during the day to Rs 1,242.90 apiece on the NSE. It was trading 0.60% higher at Rs 1,239.15 per share, compared to a 1% advance in the benchmark Nifty 50 as of 10:55 a.m.

The share price has risen 63.4% in the last 12 months. The relative strength index was at 71, implying that the stock may be overbought.

Twenty-one out of the 31 analysts tracking the company have a 'buy' rating on the stock, eight recommend 'hold' and two suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 1.3%.