Buy Bharti Hexacom, target price Rs 1,500: JM Financial

JM Financial has a buy call on Bharti Hexacom with a target price of Rs 1500.0. The current market price of Bharti Hexacom is Rs 1330.15 Time period given by analyst is year when Bharti Hexacom price can reach defined target. Bharti Hexacom, incorporated in 1995, is a Mid Cap company with a market cap of Rs 66947.50 crore, operating in the Telecommunications sector.

Bharti Hexacom’s key products/revenue segments include Service Income for the year ending 31-Mar-2024.

Financials
For the quarter ended 31-12-2024, the company has reported a Standalone Total Income of Rs 2295.70 crore, up 6.94% from last quarter Total Income of Rs 2146.70 crore and up 23.23% from last year same quarter Total Income of Rs 1862.90 crore. The company has reported net profit after tax of Rs 260.90 crore in the latest quarter.

The company’s top management includes Mr.Jagdish Saksena Deepak, Mr.Devendra Khanna, Mr.Soumen Ray, Mr.Ashok Tyagi, Mr.Arvind Kohli, Mr.Arun Gupta, Ms.Nalina Suresh, Mr.Kapal Kumar Vohra. Company has Deloitte Haskins & Sells LLP as its auditors. As on 31-12-2024, the company has a total of 50 Crore shares outstanding.

Investment Rationale
Bharti Hexacom?s (BHL) 3QFY25 revenue was 2-2.5% above JMFe/consensus at INR 22.5bn (up 7.3% QoQ and up 25% YoY) on better ARPU (at Rs 241 vs. JMFe of Rs 239) though 4G/5G subs additions were a tad lower (at 0.45mn vs. JMFe of 0.49mn). Further, EBITDA was 7-8% above JMFe/consensus at Rs 12 billion (up 13.9% QoQ) aided by lower SG&A costs. Hence, EBITDA margin improved 307bps QoQ to 53.2% in 3QFY25. Home broadband business continues to register strong subs addition while ARPU continues to moderate. Capex declined to Rs 2.8 billion in 3QFY25; net debt also fell by INR 5.9bn QoQ to Rs 78.9 billion while operating FCF improved QoQ to Rs 9.1 billion. JM FInancial maintains a BUY on BHL (revised 1-year target price of Rs 1,500) as they believe India wireless business tariff hikes are likely to be more frequent, going forward, given the consolidated industry structure and higher ARPU requirement for Jio also to justify significant 5G capex and given Jio?s potential IPO. ARPU growth aided by likely moderation in capex will drive BHL?s FCF growth from FY25, enabling it to get to net cash by FY29; this will also aid in accretion in equity value. The brokerage sees BHL as a midcap pure-play on the wireless ARPU growth story.