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On Thursday, Deutsche Bank (ETR:DBKGn) analysts lowered their rating on Bharti Airtel (NSE:BRTI) Ltd (BHARTI:IN) shares from Hold to Sell, setting a price target of INR1,450.00. The revision in the stock’s rating is attributed to a combination of factors impacting the company’s outlook.
Analysts at Deutsche Bank noted that there is increasing evidence that Vodafone (NASDAQ:VOD) Idea (VI) is being supported, which is causing them to reassess their position on Bharti Airtel. They pointed out that although the valuation growth Bharti Airtel has experienced is common in India, it does not justify maintaining the previous rating.
The analysts elaborated on their concerns, highlighting that Bharti Airtel’s stock is trading at a valuation two standard deviations above the norm based on EV/EBITDA metrics. This high valuation comes despite the absence of anticipated margin growth that could justify the elevated figures. They compared the company’s financial performance to the past when EBITDA had tripled since the late 2000s.
The Deutsche Bank team further explained that Bharti Airtel’s current valuation multiples are approximately three times higher than most other telecommunications companies they cover. This stark difference in valuation is a key reason behind the downgrade.
Bharti Airtel’s stock movement will be closely watched by investors following this rating change. The new price target of INR1,450.00 set by Deutsche Bank reflects a recalibration of the company’s expected market performance in light of the analysis provided.
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