Bharti Airtel shares may rise to ₹2,350: Macquarie ascribes a 40% probability to this scenario

Brokerage firm Macquarie has raised its price target on telecom service provider Bharti Airtel Ltd. on Wednesday, June 4, while its bull case target implies further upside on the stock.

Macquarie has an "outperform" rating on Bharti Airtel and raised its price target to ₹2,050 from ₹1,800 earlier, while reiterating its positive view on the fundamentals of India's telecom sector.

"We see an effective industry tariff put, higher free cash flow and improving return on investment capital outlook (ROIC) — a dynamic that has been materially supportive for our preferred fundamental idea Bharti Airtel," it said.

Here are the three scenarios that Macquarie has highlighted for Bharti Airtel.

Base Case: In its base case, Macquarie assumes a 11% growth in Bharti Airtel's Average Revenue Per User (ARPU) to ₹290 by financial year 2025 and applies a valuation multiple of 13 times Enterprise Value-to-EBITDA. Its base case fair value improves to ₹1,920 led by a higher mobile business multiple and a lower net debt.

Bull Case:

In its bull case scenario, Macquarie sees Bharti Airtel's ARPU at ₹300, which is a 22% growth compared to the financial year 2025 exit and also at a level that Chairman Sunil Bharti Mittal has been calling for. The valuation multiple here will be 15 times EV/EBITDA. The bull case price target of ₹2,350 implies a 27% upside from Tuesday's closing levels. "Given the potential listing of Reliance Jio, we assign a 40% weightage to this scenario," Macquarie said.

Bear Case: In the Bear case scenario, ARPU may rise to ₹275 and a valuation multiple of 10 times EV/EBITDA for the India mobile business, resulting in a fair value of ₹1,450, which implies a 22% downside from current levels. There is a 10% weightage to this scenario as the brokerage does not see multiples to de-rate.

Macquarie said at a consolidated level, its target price of ₹2,050 per share implies a 4% free cash flow yield, 11x EV-EBITDA and 32x price to earnings ratio estimated for financial year 2027.

"We expect Bharti's share price to remain supported by bullish tariff expectations. Further, in an 'expensive-on-high-expectations' broader India portfolio context, we note strong visibility for Bharti's earnings trajectory," Macquarie said in its note.

Of the 33 analysts that have coverage on the stock, 27 have a "buy" rating, four have a "hold" rating and two have a "sell" rating.

Shares of Bharti Airtel ended the previous trade session 0.67% lower at ₹1,841.6 apiece. The stock has gained 15.4% this year, so far.

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