Telecom sector poised for growth: Analysts are bullish on large-cap stocks – here’s why

As Nifty50 and Sensex hit record highs, foreign brokerage UBS released an insightful report on the telecom sector predicting significant changes and improvements for the majors. The brokerage expects a significant increase in mobile phone prices by 15-20 per cent over the next 12-24 months, helped by anticipated relief measures and regulatory support from the Government of India.

Moreover, Anil Singhvi, editor-in-chief of Zee Business, is also optimistic about the industry in the next two years.

Why is UBS bullish in the telecom sector?

UBS analysts believe that the market is already taking into account the expected price increases that are expected to occur over the next two years. This optimism stems from potential relief measures such as adjusted gross income (AGR) cuts by the Supreme Court or equity conversions and moratoriums imposed by the government. The government’s declared goal is to ensure the profitability of three private telecommunications operators, which would strengthen stability and competition in the industry.

Anil Singhvi’s views on the telecom sector

On April 23, 2024, Zee Business Editor-in-Chief Anil Singhvi gave a positive assessment of the telecom sector. He recommends that investors consider putting a significant portion of their money into telecommunications over the next two years.

Anil Singhvi on the telecom sector: Importance of telecom for India’s growth

Here are some important points about investing in this sector:

• Telecommunications is crucial to India’s digital transformation.
• India has the highest data consumption in the world.
• Telecommunications infrastructure is crucial to economic growth, especially in technology and digital payments.

He recommends investing in large telecom companies like Bharti Airtel, Vodafone Idea and Reliance Jio.

Singhvi also said there are challenges such as pricing issues and regulatory uncertainty, but he believes these are growth opportunities, not obstacles.

Brokerage recommendations regarding shares of telecommunications companies

Telecom stock recommendation: Buy Vodafone Idea shares

UBS upgraded Vodafone Idea Ltd (VIL) from “neutral” to “buy”. The brokerage raised the target price to Rs 18 from Rs 13.1. According to the brokerage, this hike is based on the expectation of government fee relief, which would be most beneficial for VIL given its highly leveraged position. UBS analysts emphasized that the company is uniquely positioned to benefit from any government intervention, which could result in a significant increase in share value of 70-80%. The company’s stock is currently trading at 11x FY26 EV/EBITDA, comparable to industry giants Airtel and Jio. A few days ago, Nomura upgraded Vodafone Idea to ‘Neutral’ from ‘Reduce’ with a price target of Rs 15.

Telecom stock recommendation: Bharti Airtel

On Bharti Airtel shares, UBS maintained a ‘neutral’ rating while raising the target price to Rs 1,430 from Rs 1,310. According to the brokerage house, the company’s stable market position and consistent results justify the cautious optimism reflected in this assessment. While no significant improvements have been made, the revised target indicates positive prospects in the competitive landscape.

On May 17, 2024, domestic brokerage ICICI Direct also released its report suggesting a buy on the stock for the long term with a target price of Rs 1,630.

Recommendation for telecommunications stocks: Indus Towers

UBS maintained its ‘neutral’ rating on Indus Towers shares while raising the target to Rs 355 from Rs 220. This revision reflects moderate optimism about Indus Towers’ growth prospects and its strategic importance in the telecommunications infrastructure sector, according to UBS.

Moreover, a week ago, FundsIndia had also recommended buy the stock with a target price of Rs 406.