Bharti Airtel sheds 6% in 2 days, JPMorgan downgrades stock to ‘underweight’

The research firm is of the view that higher 5G capex and absence of tariff hikes will drive down returns while on the other hand Jio is likely to drive more competitive pricing regime.

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Shares of Bharti Airtel lost over 3 percent and led the pack of index losers in the morning session on January 11 after JPMorgan downgraded the stock to ‘underweight’. The stock is down over 6 percent since Tuesday.

At 10:38am, Bharti Airtel was quoting at Rs 768.25, down Rs 24.60, or 3.10 percent, on the BSE. It has touched an intraday high of Rs 778.95 and an intraday low of Rs 760.60. The scrip was trading with volumes of 161,058 shares, compared to its five-day average of 64,199 shares, an increase of 150.87 percent.

The global research firm downgraded the stock to ‘underweight’ with target at Rs 710 from Rs 860 per share, a downside of 8 percent from the current market price.

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Bharti Airtel may be forced to defend its market share among high-end subscribers as Reliance Jio shifts its focus towards that audience. The defence of market share can come at the cost of higher capex and competitive prices for 5G, according to JPMorgan.

As a result, Bharti may see lower free cash flow and RoIC going forward.

“Tariff hikes are unlikely in 2023 as telecom companies focus on 5G rollout and customer onboarding. Bharti Airtel’s current market price bake in modest FY24 capex, 10 percent tariff hike, and continued return on invested capital (RoIC) expansion in FY24 are all at risk,” it added.

[With agency inputs]

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