As a telecom stock hits a 52-week high and others are closer, here’s how brokerages including Jefferies see them perform

Telecom stocks such as Bharti Airtel hit the new 52-week high for the 3rd straight trading session in Thursday’s trade (January 11), while others, including MTNL, Tata Tele, NELCO, and Vodafone Idea, are trading close to their respective 52-week high prices.

Jefferies is of the view that the telecom sector as a whole in 2024 will shift its focus to monetisation. Also, the foreign brokerage sees stars favouring tariff hikes this year. The brokerage also mentioned that there is an anticipated steady increase in 5G adoption. Additionally, the brokerage pointed out that the timing of tariff hikes as well as Vodafone Idea funding will be crucial.

Also easing investors’ dilemma, the brokerage highlighted that the upcoming spectrum auction is unlikely to pose risks.

JM Financial, in its Q3 earnings preview report, said that companies from the space are seen to log steady earnings growth aided by robust mobile broadband (MBB) upgrades. Further from the sector, it has listed Bharti Airtel as its top pick with a revised 1-year target price of Rs 1175 as it expects a structural uptrend in industry average revenue per user, or ARPU (9% CAGR over FY24-28), driven by future investment needs. The industry requires an ARPU of INR 270-300 in the next 3-5 years for a pre-tax RoCE of 12-15 per cent to justify capex, noted the brokerage.

“Bharti is the biggest beneficiary of higher tariffs given the sticky and premium quality of its subs, ensuring that tariff hikes flow through to ARPU. We expect Bharti’s India wireless ARPU to grow at a CAGR of ~9% to INR ~300 in FY28 (vs. INR 203 in 2QFY24); hence, we estimate consolidated EBITDA CAGR of ~13% over FY23-28,” adds the brokerage.