Jefferies sees 34% upside in Bharti Hexacom; stock gains over 8% in trade

Bharti Hexacom share price: Newly listed Bharti Hexacom shares on Tuesday (April 16) edged over 8 per cent higher and touched the day's high at Rs 876.75 apiece on NSE. The stock soared after global brokerage Jefferies initiated a 'buy' with a target price of Rs 1,080 apiece.

At around 10:46 a.m., shares of Bharti Hexacom traded 5.57 per cent, or Rs 44.9, higher on NSE at 851 apiece. The market capitalisation of the company stood at Rs 42,550 crore at around the same time. 

Jefferies believes that the company offers a way to invest in those parts of Bharti Airtel's business that are growing at a fast pace, have higher Return on capital employed (ROCE), and have better free cash flow conversion. 

As per the brokerage, over FY24-27, the company is expected to deliver a 16 per cent/21 per cent compound annual growth rate (CAGR) in Revenue/EBITDA. 

Furthermore, with a 16 per cent/21 per cent CAGR in Revenue/EBITDA, moderation in capex will result in a 40 per cent CAGR in free cash flow. 

The brokerage reckons deleveraging to be driven by strong cash generation of Rs 5,500 crore which should help reduce net debt to EBITDA ratio to 0.4x by FY27. 

Bharti Hexacom shares were listed on the bourses on April 12, 2024, with a 32.4 percent premium at Rs 755, as against the IPO price of Rs 570 apiece. The listing gains beat analyst estimates of a 12-15 percent premium.

Bharti Airtel holds a 70 per cent stake in Bharti Hexacom. Bharti Hexacom is a communications solutions firm that serves the telecom circles in North-East India, which includes Rajasthan and the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. It offers broadband services in addition to fixed-line phone service. The business goes by the name Airtel to market its services.

Since its listing at Rs 755 apiece, the stock has gained over 6 per cent.  

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