Bharti Hexacom-Small is beautiful, says ICICI Sec

ICICI Securities has initiated coverage on the recent debutant Bharti Hexacom Ltd with ‘Add’ rating, a notch below its ‘Buy’ rating for Bharti Airtel Ltd. At 13.5 times estimated FY26 EV/Ebitda, the domestic brokerage assigned Bharti Hexacom a 15 per cent premium over Bharti India’s valuations, as reflected in its hypothesis of ‘small, but beautiful’.

Calling it ‘The little giant’, ICICI Securities said Bharti Hexacom is small, as it caters only 7 per cent of mobile market, and is part of Bharti Airtel’s larger eco-system. “But it is beautiful as company structure allows it to have a superior capital structure, which indeed results in higher return ratios, and ‘higher for longer’ growth profile. Bharti Hexacom rating is a notch below our rating for Bharti (BUY),” ICICI Securities said.

At Rs 1,034.35 apiece, Bharti Hexacom has climbed 81.46 per cent over its IPO issue price of Rs 570.

Bharti Hexacom has outperformed peers across parameters – subscribers, ARPU, revenue, cash Ebitda, cash flow and invested capital in the last three years. Bharti Hexacom has the best return ratios among peers, and is likely to have the highest dividend payout in the space. Bharti’s strong eco-system is cherry on the cake, ICICI Securities said.

That said, Bharti Airtel continues to be ICICI Securities’ preferred pick, given its healthy estimated cash Ebitda growth of 15.3 per ecnt over FY24-27; and 6.3 per cent free cash flow (after lease/ finance) yield at FY27. Bharti Hexacom, on the other hand is expected to see higher Ebitda growth at CAGR of 21.9 per cent over FY24-27 but relatively lower FCF yield of 4.3 per cent.

“On balance, we believe Bharti Hexacom will command a premium valuation multiple over Bharti due to its superior return ratios, and ‘higher for longer’ growth. We assign 15 per cent premium to Bharti Hexacom vs Bharti India’s multiple of 12x for FY26 Ebitda, capturing our ‘small, but beautiful’ hypothesis. Business Today