However, that discount has now compressed to approximately 7%, an eight-year low, leaving what Mittal describes as limited scope for further re-rating. The shift reflects diverging share price performance between Singtel and its largest associate, Bharti Airtel.
Bharti Airtel shares have declined about 13% year-to-date, while Singtel has gained roughly 12%. A weaker Indian rupee against the Singapore dollar has further reduced Bharti’s contribution in SGD terms, even though it still accounts for about half of Singtel’s sum-of-the-parts valuation.
Mittal expects downside risks from Bharti Airtel to weigh on earnings as tariff hikes are likely to be delayed to late 2026 or early 2027 amid pressure on consumer spending from higher energy costs.
Factoring in a delayed tariff increase of about 15%, he estimates a 3% to 4% downside risk to Bharti’s FY2027 ebitda forecasts and a steeper 12% to 15% downside to net profit expectations. While earnings are still projected to grow around 25%, this falls short of consensus expectations of more than 40%.
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As a result, Mittal expects Singtel’s FY2027 earnings to come in about 7% below consensus, largely due to weaker contributions from Bharti and currency headwinds.
Reflecting these changes, he has lowered his valuation for Bharti Airtel, cutting its target price to INR2,000 and reducing the implied value of Singtel’s stake to $2.60 per share from $3.13 previously.
On the domestic front, Mittal flags potential pressure on Singapore telecom earnings. Sector consolidation has been delayed pending regulatory approval for a merger between smaller operators, while StarHub has guided for a 20% to 25% decline in group ebitda in 2026, suggesting a slower recovery in the mobile market.
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Singtel has delivered about $200 million in annual cost savings over the past three years, which have supported earnings stability. However, these savings have largely been exhausted, and consensus forecasts of stable Singapore operating profit in FY2027 may be optimistic.
“In the absence of more cost savings coupled with an intensified competition from a more aggressive StarHub, we cannot rule out downside risk of 5% to 6% to consensus Singapore telco estimates or 2% to 3% to consensus OpCo ebit estimates,” writes Mittal in his March 23 note.
Mittal keeps his valuation of Singtel’s core operations unchanged at 6 times forward Ev/Ebitda for Singapore and Optus, while maintaining a 25 times forward Ev/Ebitda for its data centre business, implying a core value of about $1.57 per share.
Dividend yield also offers limited support, with Singtel yielding below 4%, compared with a five-year average of 4.8%, he adds.
As at 11.54 am, shares in Singtel are trading 25 cents lower, or 4.8% down, at $4.96.
