Pick of the week – Bharti Hexacom Ltd

Buy Bharti Hexacom in the price range of Rs 1770-1805. Add on dips in Rs 1615-1645 price band. Base case fair value: Rs 1955. Bull case fair value: Rs 2085. Time horizon: 2-3 quarters.

 Our Take:

Bharti Hexacom Ltd. (BHL) is a communications solutions provider offering consumer mobile services, fixed-line telephone, and broadband services to customers in the Rajasthan and the North East circles, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. The company provides digital offerings to enhance customer engagement and offers differentiated, customised solutions. As a subsidiary of Bharti Airtel, the company leverages its robust digital infrastructure and collaborations to navigate the challenges of a highly competitive market. BHL provides mobile services in Rajasthan and the Northeast, and the company is the second-largest wireless mobile operator in these two circles, with a market share of 38.5% by subscribers in May 2025, as per TRAI.

BHL is focused on the premiumisation of its services, resulting in an augmented Average Revenue Per User (ARPU) from Rs 135 in FY21 to Rs 246 in Q1FY26. Its current ARPU is only 1.8% lower than Bharti’s, indicating that its underlying returns are likely to remain superior. The company is set to increase its tariff in FY26E. The company’s strategic focus on acquiring and retaining high-value customers through competitive pricing and superior services has propelled its growth. With an emphasis on digital infrastructure investments and collaborations with Airtel, BHL has consistently increased its ARPU and market share, outperforming competitors in its circles.

The company continuously invests in network expansion, technology advancement, and judicious spectrum investments, deriving significant synergies from its relationship with its promoter, Airtel, through the expansive digital infrastructure, digital experience, and the digital services it provides to its customers.

Valuation & Recommendation:

India’s telecom market exhibits growth potential, driven by under-penetration, economic expansion, and the need for improved telecom tariffs in alignment with global peers. BHL, a subsidiary of Bharti Airtel, navigates the Indian telecom industry’s dynamic landscape and has emerged as a resilient contender, showcasing substantial growth and strategic positioning. BHL 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. The company plans to leverage its strengths to expand its customer base, enhance its service offerings, and drive revenue growth. Its parental support, strategic positioning, robust financials, and operational efficiency make us positive on the stock.

Investors can buy in the Rs 1770-1805 band and add on dips in the Rs 1615-1645 band (28x Sept’27E EPS & 13.5x Sept’27E EV/EBITDA). We believe the base case fair value of the stock is Rs 1955 (33.5x Sept’27E EPS & 16x Sept’27E EV/EBITDA) and the bull case fair value of the stock is Rs 2085 (35.75x Sept’27E EPS & 17x Sept’27E EV/EBITDA) over the next 2-3 quarters. At the LTP of Rs 1787.6, the stock is trading at 30.6x Sept’27E EPS & 14.8x Sept’27E EV/EBITDA

Disclaimer : This content is only for informational purpose. Do not make any investment based solely on this recommendation as it is not based on your unique risk profile and investment objectives. Investment in stocks are subject to market risks and other risks. There is no guarantee of the return that will be given.

Source: HDFC Securities Prime Research

To see full report and full disclaimer, click on: https://static.hdfcsec.com/research/reports/019a237ed4b6764fa049c6e9ee369d2d.pdf