Tuesday, July 26, 2011

Buy Bharti, Idea and RCom on dips

Shares inIdea Cellular Ltd andBharti Airtel Ltd hit their 52-week high on Monday after the latter on Friday increased its tariffs by 20 per cent for prepaid subscribers in six circles, including Delhi, Kerala and Gujarat.

Shares in Idea Cellular Ltd hit its 52-week high of Rs 94.35 in early trade today. At 12:42 PM, shares in the company were trading 7 per cent higher at Rs 91.25.

Shares in Bharti Airtel hit its 52-week high of Rs 428.20 in early trade. At 12:41 PM, shares in the company were trading 3.6 per cent higher at Rs 426.00. "Bharti Airtel Ltd increased tariff by 20 per cent in six circles which fairly contributes 36 per cent to the revenue of the company", says Karan ofICICI Direct in an interview with ET Now.

"Looking at a 20 per cent hike which should probably on the prepaid side it would result in 50-55 bps increase in EBITA margins for the consolidated entity for FY12 and 70% for FY13", adds Karan

According to media reports, Bharti Airtel Ltd is the second telecom player to increasecall rates afterTata Docomo which raised tariffs in one-two circles two months ago to protect falling margins and increasing revenue. The tariff for Bharti Airtel hiked for the first time since October 2009.

Most analysts expect overall impact of 2-3% on revenue per minute (RPM). The RPM is expected to improve from 45 paise to 46-47 paise forBharti Airtel Ltd.

"I was positive on Bharti Airtel Ltd in that sector and continue to remain bullish on that stock even from here on" adds Mehrab Irani, Investment Manager,Tata Investment Corporation Ltd in an interview with ET Now.

"This move particularly on the prepaid side is more positive because the prepaid service was the point where the lots of ARPUs were not so good and they were actually very low", adds Irani.

Telecom shares were in demand after Bharti Airtel raised call tariffs up to 20 per cent in six circles, triggering expectations other firms will follow soon to protect their eroding margins.

"Idea Cellular Ltd and Vodafone might soon get in line to increase their respective prices in near term", adds Karan.

Reliance Communications Ltd shares jumped as much as 6 percent to their highest level in about two weeks. At 12:30 PM, shares in the company were trading 6.5 per cent higher at Rs 99.70 on BSE.

Trading Calls:

"Bharti Airtel Ltd and Idea Cellular Ltd broke out to their fresh 52-week high on back of large volumes. Bharti Airtel will see levels of Rs 435-440 and traders and keep a stop loss of Rs 390-395", says Ashwani Gujral in an interview with ET Now.

"Idea Cellular Ltd has broken out after being in a tight range for several days and can see target of Rs 95-96 and traders can put a stop loss of Rs 78-80.

ICICI Direct maintains a 'BUY' on Bharti Airtel Ltd with a target price of Rs 398 and for Idea Cellular Ltd the brokerage maintains 'HOLD' with a price target of Rs 70.00.

"In case of Bharti Airtel, even current levels are good enough if you are a slightly long term trader which means if you are prepared to wait for a few weeks, you do not mind buying at current prices also", says Sudarshan Sukhani of Technical Trends in an interview with ET Now.

"For very short term traders, you want consolidation, small dips to enter but Bharti has much higher targets ahead, I am not so upbeat on Idea", adds Sudarshan.

Well not all analysts are upbeat on the stock some warn of caution while trading in Bharti Airtel's shares as the prices have already perked up from its 52-week low of Rs 292.70 on 22nd July, 2010.

"The price hike trigger is positive news for Bharti Airtel Ltd of course but in terms of valuation, we have got to be careful", adds Ajay Srivastava, Dimensions Consulting Pvt Ltd in an interview with ET Now.

"It has already gone up quite substantially, so if they are chasing the valuation now, it is at a risk today", adds Ajay. "We are chasing the last leg of the immediate rally in Bharti Airtel, so we have got to be careful when we are buying the stock", adds Ajay.

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