Bharti Airtel stock set for a 24% upside, says Kotak Equities; pegs EBITDA CAGR at 14%

Shares of India's leading telecom operator Bharti Airtel Ltd are set for a 24% upside, says Kotak Equities.  Assigning a 'buy' call, Kotak Equities said Bharti Airtel offers a compelling combination of sustained Average Revenue Per User (ARPU) growth, strong Free cash flow (FCF) and rising shareholder payouts over the next few years. The stock is in a correction mode in the short and medium term. The large cap stock has clocked negative returns for up to a year.

Bharti Airtel shares ended 0.24% higher at Rs 1776 on Tuesday on BSE. Bharti Airtel’s market cap rose to Rs 11.08 lakh crore. Total 4.62 lakh shares changed hands amounting to a turnover of Rs 82.10 crore on BSE.

The brokerage is of the view that organic premiumisation and future tariff hikes should drive healthy revenue and earnings growth, while moderating capex supports deleveraging and higher cash returns.

Concerns over Singtel 

Concerns around potential Singtel stake sales are largely overdone, said Kotak.

Earnings Estimates 

It pegs a 14% EBITDA CAGR, 30% EPS CAGR and 6% FCF yield over FY2026-29E.  Kotak continues to see attractive risk-reward, with Bharti trading at 8X EV/EBITDA on March 2028E post the recent correction.

The widening gap between EBITDA growth and EPS growth reflects the impact of deleveraging. Kotak believes that organic premiumisation, along with potential tariff increases, can support sustained revenue and earnings growth, while lower capital expenditure should help accelerate debt reduction and improve cash generation.

As the company’s debt burden declines, a corresponding reduction in interest costs can provide an additional boost to profitability. This could allow operating growth of around 14% to translate into earnings growth of nearly 30%.

Importantly, the estimated 6% free cash flow yield provides an independent support to the investment case, as it does not rely on tariff hikes being implemented within the expected timeframe.