Bharti Hexacom climbs up to 9% after JP Morgan initiates overweight rating; stock up 87% over issue price since listing

Bharti Hexacom shares gained up to 9 per cent to Rs 1,158.60 in Tuesday's trade (July 16) as global brokerage JP Morgan initiated coverage on the stock with an overweight rating and a target of Rs  1,280 per share. The set target implies a potential upside of 20 per cent from the last close.

At the last count, the stock was up 6.97 per cent or Rs 74.3 at Rs 1,139.85 apiece on the BSE.

The brokerage said the company operates in two underpenetrated circles of Rajasthan and North East and herein there is lower tele density, internet penetration and postpaid mix. Hence, the company enjoys stronger tailwinds from subscriber growth as well as organic average revenue per user (ARPU) expansion.

JP Morgan added that Bharti Hexacom's ARPU is only 2 per cent lower than Bharti Airtel's, suggesting that underlying returns will remain superior. 

The brokerage anticipates 15 per cent tariff hike each in the fiscal year 2025 and 2026 that will drive 17 per cent/21 per cent revenue/ EBITDA CAGR over FY24-27.

Further, the brokerage believes that the company is the best play on the market repair thesis, given its presence in wireless as compared to Bharti and Vodafone Idea. 

Also, the brokerage expects dividend payouts by the company to increase on the back of improving free cash flow (FCF) from tariff hikes and falling capex. The dividend payouts will increase from 23 per cent in FY24 to 34 per cent in FY27.

Incorporated in 1995, Bharti Hexacom provides fixed-line telephone and broadband services to customers in Rajasthan andNorth East teleccircles.