“We downgrade Bharti to U/P (underperform from neutral) as we find its risk-reward unfavourable,” said BofA’s analyst Sachin Salgaonkar in a client note.
The brokerage said one round of tariff hikes has already been factored in and there is a risk of further increases being postponed until after the general elections in 2024. “Competition may increase with Jio getting aggressive in the postpaid market and potential entry of Adani in 5G/B2C apps,” said Salgaonkar.
On Wednesday, 386,000 Bharti shares changed hands on the BSE as against the two-week daily average of 63,000 shares.
Downgrading its ratings from overweight to underweight, JP Morgan said Bharti’s shares bake in modest capex estimates for FY24, a 10% tariff hike and continued return on invested capital (ROIC) expansion in FY24.
In the past six months, Bharti shares have gained 15.4% as against the 11.4% up move in the benchmark Nifty.
“We believe a combination of higher 5G capex, a lack of tariff hikes and deflation in premium ARPUs will drive down ROICs,” said JP Morgan’s analysts Ankur Rudra and Bhavik Mehta in a client note. “RJio’s focus shift to premium subscribers from entry-level should deflate pricing at premium end and drive a return to a more competitive pricing regime.”
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