Bharti Hexacom Gets Rating, Target Price Upgrade From Jefferies On Expected Tariff Hike Play

Bharti Hexacom Ltd. will benefit the most from the expected tariff hikes over the next few years among its peers, according to Jefferies, which has upgraded the stock's rating to 'buy' from 'hold'. The brokerage has also raised the stock's target price to Rs 1,600 per share from Rs 1,260 apiece earlier, implying a 29.45% upside.

Jio's rising focus on growth and Vodafone's market share loss may need multiple tariff hikes over the next few years, Jefferies said.

"We raise our FY26/27 revenue/Ebitda estimates by 5-12%, as we now model a 10% tariff hike in mid-FY26, in addition to the 10% hike we were modeling in 2QFY27," it said.

The brokerage is confident about Jio's tariff hikes as Reliance, at its AGM, mentioned its aim to double revenues and Ebitda over the next three-four years, at a revenue base of Rs 1 trillion.

To achieve this, Jio may require multiple tariff hikes even after assuming scaled up home broadband and data center businesses, it said. "Jio's recent lead of tariff hikes is a step in this direction, and its rising focus on monetisation gives us confidence of another tariff hike likely in mid-2025."

Vodafone Idea's revenue market share has fallen further in the June quarter to 15.5%, said Jefferies. "By the time VIL completes network investments, it may see further decline in market share."

Amid lower market share, Vodafone will need higher tariff hikes to bridge the gap between its current operating cash flows and the payments due to the government from fiscal 2025, according to the brokerage.

For Bharti Hexacom, Jefferies expects annual growth of 19%/25% in revenues/Ebitda. "Strong Ebitda growth, along with moderating capex could drive a 66% annual growth in its FCFE (free cash flow to equity) over FY24-27. Bharti Hexacom's faster growth should keep its valuations at a premium to Bharti Airtel's India ops."