Bharti Hexacom (BHARTIHE IN) Initiate at Buy: Robust growth; focus on shareholder return

Research evidence excerpt

Bharti Hexacom (BHARTIHE IN) Initiate at Buy: Robust growth; focus on shareholder return

4 11.7 10.5

leverage. Rising EBITDA, alongside a moderation in capex intensity (as a percentage ROE (%) 26.1 29.3 37.5 40.6

of revenue), should translate into robust free cash flow (FCF) generation.

52-WEEK PRICE (INR)

Dividend forecasts well above consensus; net cash positive by FY29e: Hexacom 2200.00

has pure-play exposure to India’s telecom services. The company is not allocating

1750.00

capital to adjacencies (such as data centres, etc), which enables faster deleveraging.

We, therefore, expect Hexacom to reach net cash by FY29e, from a Net Debt/EBITDA 1300.00

07/25 01/26 07/26

of c1.1x in FY26. With rising profits, FCF and robust balance sheet, we see room for Target price: 2050.00

High: 1914.30 Low: 1437.80 Current: 1605.50

higher shareholder returns. We forecast net profit to grow by 29% over FY26-29e,

Source: LSEG IBES, HSBC estimates

while DPS surges at a 50% CAGR – supported by the payout ratio increasing to 83%

in FY29e (from c53% in FY26). Our DPS estimates are 22-48% above the Street, Rishabh Dhancholia*

and a higher-than-expected dividend payout would be a key catalyst. Analyst, Asia Telecoms

HSBC Securities and Capital Markets (India) Private

Attractive valuation; scenario analysis suggests a favourable risk-reward: The Limited rishabh.dhancholia@hsbc.co.in

stock has underperformed benchmark index by 15% and Bharti Airtel (BHARTI IN, +91 80 30012841

INR1,908.80, Buy) by c10% over the past year. This was due to muted subscriber Piyush Choudhary*, CFA

growth in FY26 caused by several one-offs, but subscriber additions have improved HeadThe Hongkongof Asia Telecomsand Shanghai Banking Corporation

in the last two quarters (page 11).