Bharti Hexacom shares saw a significant surge of 9.5% on July 16, driven by global brokerage JPMorgan’s initiation of coverage with an ‘overweight’ rating. The brokerage set a price target of Rs 1,280 for Bharti Hexacom, indicating a potential upside of 20% from its previous closing level.
By 11:09 am, Bharti Hexacom shares were trading at Rs 1,128.7 on the NSE, with trading volumes reaching 1.7 million shares, surpassing the one-month daily average of 1.1 million shares.
JPMorgan’s optimistic outlook on Bharti Hexacom stock is based on its assessment of the company as the best pure-play in the Indian market for communication solutions. “Bharti Hexacom stands out in the market repair thesis due to its substantial presence in wireless communication, unlike Bharti Airtel and Vodafone Idea,” JPMorgan stated.
Market Presence and Growth Potential:
Bharti Hexacom operates in two underpenetrated circles—Rajasthan and the North East—which have lower telecom density, internet penetration, and postpaid mix. This underpenetration provides the company with strong tailwinds from subscriber growth and organic ARPU (Average Revenue Per User) expansion, according to JPMorgan.
The company’s ARPU is only 2% lower than Bharti Airtel’s, suggesting superior underlying returns. JPMorgan also predicts a 15% tariff hike in both FY25 and FY26 for Bharti Hexacom, driving a 17% and 21% revenue and EBITDA CAGR, respectively, over FY24-27.
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Financial Outlook:
As a result of the anticipated tariff hikes and decreasing capital expenditures, JPMorgan expects Bharti Hexacom’s dividend payouts to rise from 23% in FY24 to 34% in FY27, attributed to the improving free cash flow.
Industry Comparison:
Just last week, Investec, another global brokerage, also initiated coverage on Bharti Hexacom with a ‘buy’ rating, setting a target price of Rs 1,240, implying an upside of around 18%. Investec also highlighted Bharti Hexacom’s favorable position to benefit from tariff hikes.
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Conclusion:
The positive coverage and favorable outlook from major brokerages like JPMorgan and Investec underline Bharti Hexacom’s strong market position and potential for substantial growth in the coming years