‘Airtel stock’s weak show in line with global peers’ | Economic Times

Mumbai: Emkay Global said Bharti Airtel’s stock underperformance in the past 5-10 years is in line with its global peers. The brokerage said shares of over 60% of the telecom companies worldwide have significantly underperformed their respective regional indices over both the near- and long-term, while the remaining ones have managed to outperform only intermittently, implying weak investor interest in this sector globally.“The global underperformance of telcos can be attributable to the low-single-digit growth in revenue and Ebitda in the last 10 years, capital-intensive nature of the business, fast technology changes, sub-par return ratios, high competitive intensity and capital allocation strategies,” said Emkay’s analysts Naval Seth and Sonali Shah in a note to clients. The study is based on the performances of 24 global telecom operators across 12 markets. 85754600Though Bharti’s stock performance over the long term is more or less in line with global peers, Emkay said it has outperformed the Sensex in the past three years after tariff hikes and amid the possibility of a duopolistic market with Vodafone Idea’s financial position weakening. It said Bharti’s stock returns are also higher than the global average across all time frames, except on a 10-year basis. The stock gained 21% since January as against the Sensex’s advance of 17.5%.Emkay said Bharti has seen strong interest from domestic institutions but foreign participation has been sporadic and weak so far. “FII ownership plays a crucial role in share price movement,” said the analysts. “In those quarters where FIIs have gone OW (overweight) or reduced UW (underweight), the stock price has delivered positive returns sequentially.”Emkay said sustained re-rating of Bharti hinges on tariff hike, strict control over capex and capital allocation. “Past trends (10 years) also reveal that the sector provides more trading opportunities than structural shareholder returns for the obvious reasons.”Emkay said Bharti’s stock price movement has been vulnerable to tariff aggression from Reliance Jio. “Though these moves had no financial impact on Bharti, investors remained cautious... JioPhone Next is expected to be launched on September 10, and it could turn out to be another round of pricing aggression,” the analysts said.