RIL vs Airtel: Tariff hike phase begins in telecom sector, which stock has a stronger future

Telecom Stocks Outlook :Finally, after a long wait, telecom companies have started increasing tariffs. The first step in this sequence was taken by Reliance Jio, which is the telecom arm of Reliance Industries. After that Bharti Airtel and then Vodafone Idea also increased the tariff. The new rates of Jio and Airtel will come into effect from July 3 and the new rates of Vodafone Idea will come into effect from July 4. After the increase in tariff, good movement is also being seen in the shares of Airtel and Reliance Industries. At the same time, experts and brokerage also believe that this will improve the health of the telecom industry. Both the major companies will benefit from this.

Reliance Industries

Brokerage House Motilal Oswal has given a Buy rating on Reliance Industries and given a new target of Rs 3275. The brokerage says that we expect a 20 per cent tariff hike to increase ARPU by 15 per cent (INR206 ARPU in FY25E) as prices have not increased for all plans. As a result, the brokerage has raised its revenue/EBITDA estimates by 11%/17% in FY25/FY26. EBITDA is expected to be Rs 701 billion/798 billion. According to the brokerage, revenue/EBITDA may see a CAGR of 17%/23% during FY24-26.

RJio is valued at an EV/EBITDA multiple of 12x of FY26E EBITDA, which gives a valuation of Rs 840/share, adjusted for its 66% stake (compared to Rs 810/share earlier). In addition, the brokerage has given an equity valuation of Rs 1593 per share to Reliance Retail and Rs 37 per share to New Energy Business.

After tariff hike by Jio Brokerage House Jefferies While giving Buy rating on the stock, the target price has been given as Rs 3580. The brokerage has estimated growth of 18 percent and 26 percent annual rate in revenue and profit of Jio from FY 2024 to FY 2027. At the same time, Morgan Stanley has given Overweight rating on the stock and has given a target price of Rs 3046.

Brokerage House Morgan Stanleysays the tariff hike is in line with expectations, and it expects new energy cash flow by the end of the year. The investment bank expects no further tariff hikes until fiscal 2027, but a 20 per cent tariff hike next year could boost earnings by 10-15 per cent.

Airtel

Brokerage House Nomura has given a Buy rating on Bharti Airtel’s stock and set a new target price of Rs 1650. The brokerage house says that the company has increased its tariff plan by 13-21 percent, while there has been no change in the entry level unlimited 5G plan. The outlook of the telecom industry is strong. The focus has shifted to value creation and monetization. The company management is focused on taking ARPU to 300 in the financial year 2026. According to the brokerage, the company can do another tariff hike by the financial year 2026. Tariff reform is now visible on the horizon. This will strengthen the earnings of the industry, as well as improve the health of the industry.

Brokerage House Morgan StanleyAccording to the brokerage, tariff hike by Bharti Airtel may give an immediate boost to the stock, as seen in 2019 and 2021. However, this tariff hike will not lead to any significant upgrade in their EBITDA estimates. According to the brokerage, a mixed tariff hike was largely expected this time. The brokerage says that currently, as per our estimate, one year forward EV/EBITDA (India business) is Rs 13.2x, slightly lower than its all-time peak of 13.7x.