Bharti Airtel’s growth outlook strong; Goldman Sachs raises target price to Rs 1,780

Goldman Sachs has reiterated a ‘Buy’ rating on Bharti Airtel, raising its target price to Rs 1,780 from Rs 1,695. The brokerage is optimistic due to higher free cash flow (FCF) generation, strong earnings visibility, and the consolidation of Indus Towers, which has driven up revenue and EBITDA estimates for FY25-28 by 8 per cent and 11 per cent, respectively. Additionally, Bharti’s focus on premium services, including its latest partnership with Apple, is expected to boost customer retention and ARPU growth.

Higher earnings, but lease costs impact long-term PAT

Airtel has introduced a new EBITDA disclosure method that accounts for lease expenses, impacting its future projections. While FY25 net income is expected to jump 42 per cent due to an exceptional gain from the Indus Towers business combination, Goldman has lowered its FY26-28 PAT estimates by 7 to 16 per cent, factoring in lease interest costs.

Investors prefer India investments over Africa expansion

Bharti Airtel’s India business is witnessing stronger cash flows, which could translate into higher shareholder payouts starting CY25. However, Goldman flagged concerns over Airtel’s decision to purchase a 5 per cent additional stake in its Africa entity, suggesting investors would prefer increased investments in the India business and strategic assets like data centres.

Premium customer engagement via Apple partnership

Airtel has partnered with Apple to offer Apple TV+ and Apple Music to its home Wi-Fi and postpaid users, reinforcing its strategy to enhance premium customer engagement. This initiative is expected to strengthen user retention and drive revenue growth.

With solid revenue visibility, improving cash flows, and a strategic focus on India, Bharti Airtel remains a top choice for long-term investors, despite near-term concerns over capital allocation.