Mumbai: Goldman Sachs reiterated its “sell” rating on Vodafone Idea and retained its target price at Rs 3.30, and said it expects continued erosion in its market share. It believes that peer Bharti Airtel offers an attractive entry point.

On Monday, Vodafone Idea shares closed 0.2 per cent lower at Rs 10.39. It has jumped nearly 4 times from its 52-week lows of Rs 2.61 seen in November last year.

The brokerage pointed out that Vodafone Idea’s capex has consistently been lower by more than 50 per cent, compared to its rivals Bharti Airtel and Jio, and as a result, its overall customer base was down 34 per cent in the last two years.

That said, Vodafone Idea’s postpaid customer base was down by just 10 per cent during the same period, and in fact its postpaid postpaid customer base continues to be more than 50 per cent higher than that of Bharti.

“While we do expect continued erosion in Vodafone Idea’s market share, despite a weaker network versus peers, the company has largely held on to its customer base so far, reinforcing our view that this segment has very high customer stickiness,” Goldman Sachs analysts said in a note.

The brokerage, however, said the pessimism around Jio’s launch of new postpaid plans was unwarranted and it did not believe that these new plans could have a significant impact on Bharti’s postpaid revenues and group EBITDA.

In a note on September 24, it pointed that Bharti now trades at close to one standard deviation below five-year average on EV/EBITDA, with multiples having de-rated 30 per cent from their recent peak, despite estimates continuing to move up.

“We see this as unwarranted, and reiterate our Buy rating with an unchanged 12-month target price of Rs 625, offering 44 per cent upside from current levels,” the analysts said.

Shares of Bharti Airtel rose 0.8 per cent on Monday to close at Rs 443.40. It is down more than 15 per cent over the last one month.

“We believe Bharti can sustain double-digit EBITDA growth for the foreseeable future (we forecast a 26 per cent FY20-23E EBITDA CAGR), with upside risks from higher-than-expected tariff hike and market share gains from Vodafone Idea,” they added.

It maintained its buy rating on Reliance Industries (RIL) with a 12-month target price of Rs 2,325.

Shares of RIL closed 0.6 per cent higher at Rs 2,215.75 on Monday, and have gained more than 155 per cent from its March lows of Rs 867.82.

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