Bharti Airtel downgraded to 'Hold' rating

Bharti Airtel, one of the leading telecom providers in India, has recently been downgraded to a 'Hold' rating by MarketsMOJO on January 4th, 2024. This decision was based on various factors, including the company's financial performance and market trends.
While Bharti Airtel has shown healthy long-term growth with an annual increase of 12.93% in net sales and 26.35% in operating profit, its stock has been technically in a bullish range. The technical trend has improved since November 13th, 2023, and has generated a return of 12.19% since then. Additionally, multiple factors such as MACD, Bollinger Band, KST, and DOW have also shown a bullish trend for the stock.

However, despite these positive aspects, the company's valuation is considered fair with a 2.9 enterprise value to capital employed ratio. It is also trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 29.30%, its profits have risen by 95.6%, resulting in a PEG ratio of 0.6.

Bharti Airtel also has a high institutional holding of 41.71%, indicating that these investors have better resources and capabilities to analyze the company's fundamentals. Their stake has also increased by 0.53% in the previous quarter.

The company has consistently shown strong returns over the last three years, outperforming the BSE 500 index in each of the last three annual periods. With a market cap of Rs 5,81,123 crore, it is the largest company in the telecom sector, constituting 79.76% of the entire industry. Its annual sales of Rs 146,297.20 crore also make up 69.68% of the industry.

However, one concern for Bharti Airtel is its low ability to service debt, with a high debt to EBITDA ratio of 3.28 times. This could potentially impact the company's financial stability in the long run. Additionally, its return on equity (average) of 5.64% signifies low profitability per unit of shareholders' funds.

In conclusion, while Bharti Airtel has shown strong growth and market trends, its high debt and low profitability could be a cause for concern. Investors are advised to hold onto their stocks and monitor the company's performance closely.