Bharti Airtel, Vodafone Idea Stocks Dip from 52-Week Highs: Is Now the Time to Buy?

Bharti Airtel shares hit an all-time high while Vodafone Idea and Indus Towers stocks scaled 52-week peaks in morning deals on June 28 as leading telecom firms in India have started increasing mobile plan tariffs. The stocks, however, gave up gains later in the day and were trading up to 3% lower.

According to Morgan Stanley, the tariff hikes are in line with market expectations in terms of timing and magnitude.

Reliance Jio revised tariffs on Thursday, followed by Bharti Airtel, which hiked rates by 10% to 21%. Bharti Hexacom's circle rates have also been hiked. According to Taher Badshah of Invesco Mutual Fund, the hikes were expected within the industry. 

In an interview with CNBC TV18, he noted a cautious approach towards spending on spectrum acquisition, suggesting companies that have effectively executed their strategies and delivered strong results have experienced a re-rating in their valuations.

Analysts at Morgan Stanley estimate a significant increase of 16-18% in blended Average Revenue Per User (ARPU) for both Bharti Airtel and Reliance Jio.

Following Jio's tariff adjustments, Bharti Airtel's stock is projected to establish a new price floor in the range of ₹1,000-₹1,050. Looking ahead, the brokerage foresees a potential upside of 11-15% assuming current valuation multiples are sustained over the next year based on conservative projections.

CLSA noted that Bharti Airtel and Vodafone Idea tariffs were at a 20-25% premium to Jio. Meanwhile, Bernstein feels Vodafone Idea is expected to grow by 20-25%. According to JP Morgan, Jio's tariff revision has shifted focus from market share gains. 

Jefferies has maintained a Buy rating on Bharti Airtel with a target price of ₹1,720 per share. The brokerage noted that Reliance Jio's tariff adjustment, excluding feature phone users, indicates a continued focus on expanding its subscriber base. Jio's new tariff plans underscores its heightened focus on monetization strategies. 

The international brokerage expects Reliance Jio to achieve 18% and 26% CAG₹in revenue and PAT respectively from FY24 to FY27. The willingness of Reliance Jio to revise tariffs is viewed positively for the revenue and margin outlooks of both Bharti Airtel and Jio, it added. 

Reliance Industries (RIL) stock hit a fresh record high of ₹3,129.85 on NSE. Jefferies has issued a buy recommendation on the stock, raising its target price to ₹3,580 per share following Jio's tariff adjustment. The brokerage has slightly adjusted Jio's estimates for FY25-27 by up to 3%, projecting revenue and profit after tax (PAT) compound annual growth rates (CAGRs) of 18% and 26% respectively from FY24 to FY27. 

Additionally, Jefferies made minor tweaks to Reliance Industries' FY25/26 EBITDA estimates, incorporating adjustments based on Jio's financial metrics.