Buy Bharti Airtel Ltd For Target Rs. 2,300 by Axis Securities Ltd
Strong Business Performance; ARPU Continues to Gain
Est. Vs. Actual for Q1FY26: Revenue: INLINE; EBIT margin: INLINE; PAT: INLINE
Recommendation Rationale
Steady QoQ Growth in Mobile Services Driven by Premiumization: The mobile services business continues to record a growth of 2.9% QoQ, led by a focus on portfolio premiumization and an additional day in the quarter.
Strong 5G Adoption with Growing Smartphone Customer Base: Bharti Airtel has 152 Mn 5G customers. 5G shipments now account for 86% of total smartphone shipments at the industry level, and its 5G sites handle 36% of total network traffic. Smartphone data customer base stood at 280.7 Mn, increased by 3.9 Mn QoQ and 21.3 Mn YoY.
ARPU Leadership with Growth Focus: The company’s ARPU continues to be the best in the industry. It intends to improve ARPU by focusing on higher post-paid customers, international roaming, and upgradation to smartphones from feature phones.
Non-Wireless Focus Driving High-Margin Growth: Bharti Airtel is focusing on non-wireless business by investing in B2B, data centres, and home broadband, generating higher margins with a moderate capex.
Sector Outlook: Positive
Company Outlook & Guidance: The company has a strong focus on quality customers with increasing ARPU and revenue. The management is confident of gaining industry-leading growth backed by robust rural penetration and a superior services portfolio.
Current Valuation: SOTP-based
Current TP: Rs 2,300/share
Recommendation:
From a long-term perspective, we believe Bharti Airtel would continue to gain market share, backed by the highest penetrations, and with minimum Capex requirements. Therefore, with a stronger digital portfolio supported by rising per-user data and growing business verticals, we are positive about the company’s future growth. We maintain our BUY recommendation on the stock.
Financial performance
In Q1FY26, the company reported revenue of Rs 49,463 Cr vs Rs 38,506 Cr (Q1FY25), up 28.5% YoY, 3.3 % QoQ. EBIT stood at Rs 15,374 Cr vs Rs 9,168 Cr (Q1FY25), up 67.7% YoY and 4.7% QoQ. EBIT margins stood at 31.1% vs 23.8% up 727 bps YoY and 28 bps QoQ. It reported Net Income of Rs 7,422 Cr vs. Rs 4,718 Cr, up 57% YoY and 40% QoQ, due to tax reversal benefits in the last quarter. ARPU (Mobile Service) for the quarter stood at Rs 250 (+18.5% YoY; 2% QoQ). Capex for the quarter stood at Rs 8,307 Cr.
Outlook
From a long-term perspective, Bharti Airtel remains well-positioned for sustainable growth, backed by its strong digital services portfolio, disciplined capital management, and focus on high-value customer segments. The company expects gradual ARPU improvement, 4G/5G expansion, and B2B growth to drive long-term profitability. We remain optimistic about the company’s future growth.
Valuation & Recommendation
The company anticipates steady revenue growth across its core segments, supported by rising 4G and 5G adoption, broadband penetration, and increased demand for enterprise solutions. EBITDA margins are expected to remain robust, aided by operational efficiencies, network optimisation, and monetisation of digital services. The Management continues to prioritise financial discipline, targeting sustained free cash flow generation and progressive debt reduction. Hence, we maintain our BUY recommendation on the stock. Based on the SOTP valuation, we arrive at a TP of Rs 2,300/share, implying an upside of 20% from the CMP.
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SEBI Registration number is INZ000161633
