Will Bharti Airtel shares sustain in the remainder of 2022?

According to the user base, Bharti Airtel is the second-largest telecom company in India. Globally, it has a presence in 17 countries. It claims to be one of the top three mobile operators globally, with its networks covering over two billion people. It is also the second-largest mobile operator in the African continent.Besides, the company has interests in payments banking, AdTech, data centres, cloud communications, direct-to-home TV, broadband, and digital marketplace.

The company is also the best-run telecom company in India, with industry-leading average revenue per user per month in the wireless business. ARPU is a metric used to determine the efficiency of a telecom company in generating revenue. As of October end, shares of the company have outperformed the benchmark Nifty so far in 2022. It has delivered 16% returns to shareholders, and trades around Rs. 800 per share, thanks to its rapid growth in ARPU.

However, with recent tariff hikes priced in, the main driver for share price appreciation is behind. Now, ARPU is likely to stagnate unless the company steps to raise tariffs. However, analysts remain upbeat about Bharti Airtel share for multiple reasons. In India, the business operates in a virtual duopoly where Reliance Jio and Airtel are two companies competing against each other, while Vodafone Idea has been consistently losing users.

Analysts at ICICIdirect also highlight that the favourable industry structure of three players (two being strong), government relief, tariff hike and fundraising puts Airtel in a sweet spot to maintain its relative strength among peers with a formidable digital ecosystem offering.According to them, key triggers for future price performance are:

Tariff hike:Any further tariff hike and its pass through to consumers would bolster margins, along with ARPU. Its margins stand at 50%, which has come down slightly due to lower African margins.
Market share gains: As stated earlier, Vodafone Idea is losing customers every month, converting into users as every new user means more revenue for Airtel.
5G: Having recently launched 5G services in many cities across India. Analysts believe this will provide further growth opportunitiesfor the company.
Falling debt: Even though the company has substantial liabilities, the overall deficit is coming down thanks to moratorium relief from the government on statutory debts and consistent payout. It now stands at Rs. 1.19 lakh crore, down by Rs. 4,035 crorein June 2022.

ICICIdirect analysts have a ‘Buy’ rating on the share pricewith a target price of Rs. 860. This means they see around a 7-8% potential upside from hereon in the next 10 months. This implies that the stock price may not rise much in the last two months of 2022.

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