Should one get hopes high on Bharti Airtel?

The rebranding that has come about for Vodafone is a big thing, apart from the financial strengthening that has happened over a period of time, says Mahantesh Sabarad, Head- Retail Research, SBICAP Securities.

Bharti is one telecom or a digital play which has gone back to its pre Covid level. While the world has moved left, Bharti has moved right. Why is that?
For a long time back, we were discussing the difficulties that Vodafone was facing in the telecom market. Over a period of time, what has happened is that Vodafone has not only strengthened itself, it has rebranded itself. So the people or the market participants who were really writing off Vodafone and therefore assuming that there will be market share gain for both Reliance Jio as well as Bharti Airtel, are now seeing that perhaps Vodafone may not necessarily lose its market share in a big manner. The rebranding that has come about for Vodafone is a big thing, apart from the financial strengthening that has happened over a period of time.

These telecom companies have been battling the government on the adjusted gross revenue (AGR) dues but what they have done is on the balance sheet, they have provided a substantial portion of that money already. So if worse comes to worst, they are well prepared for a cash down. From a balance sheet perspective, they are well prepared to meet any eventuality related to AGR dues. Then you have this upcoming 5G phenomenon happening where it is assumed that perhaps Bharti Airtel is on a weaker wicket when it comes to the rollout of 5G network.

All in all, while this phenomenon has played out over the last nine, 10 months or so, I tend to believe the stock has discounted far too much of this negativity that has come in. The negativity in Airtel is coming from the positivity in Vodafone. I would reckon Bharti will soon recover as well.

Steel prices have gone higher yet with the exception of Tata Steel none of the steel stocks are exhibiting a lot of momentum. What is the right way to look at steel?
JSW is also doing very well in the stock markets. So yes, the steel sector has been doing relatively better. I would not say that it is a phenomenon and just the prices are strengthening. The way to look at steel stocks is what is the conversion cost that is getting embedded in the price list.

Conversion would mean the price of steel, less the cost of producing it and the conversion cost is actually expanding. The conversion margin is expanding and that is getting duly rewarded in the way the stock prices are moving for the sector as a whole. Yes, the steel prices going up is also a phenomenon linked to the general tariff levels going up following the imposition of safeguard duties, a lot of government pressure not to bring in Chinese steel into the country.

It is the flat steel prices that are going up not necessarily the long steel prices at this juncture but when the economy starts recovering, when infrastructure growth starts kicking in we will see the long product prices also go up.