Neutral Indus Towers; target of Rs 340: Motilal Oswal

Motilal Oswal's research report on Indus Towers

Indus Towers (Indus) reported a flat revenue QoQ, but provision write-offs and lower power costs led to 14%/20% QoQ growth in EBITDA/PAT (a beat of 12%/41%). The tower additions were led by only one operator, which moderated the ASF. VIL’s fund raise and investments in the network will benefit Indus from towers and tenancy additions, and will also provide comfort in collections of past dues (INR54b). We raise our revenue/EBITDA for FY26E and factor in 8%/11% growth in revenue/PAT over FY24-26E.

Outlook

VIL’s fund raise and investments in the network will benefit Indus from towers and tenancy additions, and will also provide comfort in collections of past dues (INR54b). VIL’s financial stability post-FY27 (after the end of the moratorium) would be the key for Indus. However, for FY24-27, the increase in tenancy and tower addition would result in the FCF generation from which the company will be able to deleverage the balance sheet and continue with dividend payouts. We raise our revenue/EBITDA for FY26E by 6%/10% and factor in 8%/11% growth in revenue/PAT over FY24-26E. We arrive at our TP of INR340, which implies an EV/tenancy ratio of INR2m and an EV/EBITDA ratio of 5x. The stock has been up 75% YTD, and we believe most of the benefits are priced in at this valuation. Reiterate Neutral.