The brokerage has a “buy” recommendation with a price target of ₹1,625, which implies a potential upside of 22% from current levels. The price target also means that Bharti Hexacom will surpass its post-listing high of ₹1,609, from where it has corrected over 18%.
The capital allocation concerns stem from Bharti Airtel’s chairman Sunil Bharti Mittal’s recent statement, which indicated that Bharti Airtel could look for an overseas acquisition in the medium term.
Bharti Hexacom currently operates in North East India and Rajasthan, the former is a market where Vodafone Idea had to deprioritise due to its capital constraints.
Internet penetration is also low in these circles, compared to pan-India levels, which provides a long runway for growth, Motilal Oswal said, calling Bharti Hexacom a preferred play on India’s wireless growth story.
Motilal Oswal said that Bharti Hexacom is currently trading at a 15% premium to the implied valuation of Bharti Airtel’s India business and that premium could sustain going forward as well.
Despite the correction from the peak of over ₹1,600, shares of Bharti Hexacom are still trading 134% higher compared to their IPO price of ₹570.
Out of the 12 analysts that have coverage on Bharti Hexacom, nine of them have a “buy” rating, two say “hold”, while one analyst has a “sell” rating on the stock.
Despite this positive brokerage note, shares of Bharti Hexacom are trading 0.7% lower at ₹1,334.
