Nomura upgrades Vodafone Idea to neutral, ups target price to Rs 15 a share

Telecom operator Vodafone Idea (Vi) on May 16 reported a net loss of Rs 7,674 crore for the quarter ended 31 March, 2024

Brokerage Nomura has upgraded Vodafone Idea Ltd to neutral from reduce and increased target price to Rs 15 a share, up 13.2 percent from previous close amid improved outlook following the conclusion of its fund raise and inline 4Q.

Nomura suggests that while there's still a journey ahead, the worst of the storm has passed for VIL, with clearer skies on the horizon. They update their valuation to March 2026, applying an EV/EBITDA multiple of 15x. The industry outlook has improved significantly, with all players now focused on increasing ARPU and the market settling into a three-private player dynamic, they said.

Nomura slightly reduced its FY25F EBITDA forecast by 2% but raised FY26F EBITDA by 6%, considering lower subscriber losses. VIL's successful fundraising enhances its prospects, enabling it to enhance network experience, start 5G rollout, and compete effectively. They anticipate a substantial 15% tariff hike post-Central elections, which could be a significant trigger for the stock. Additionally, they expect government relief for VIL's FY25 payments.

Telecom operator Vodafone Idea (Vi) on May 16 reported a net loss of Rs 7,674 crore for the quarter ended 31 March, 2024. The company's loss widened in the quarter under review from Rs 6,418.9 crore in the year-ago period. Revenue from operations increased marginally at Rs 10,606 crore from Rs 10,531 crore in the same quarter last fiscal.

The company's average revenue per user (ARPU), which provides insights into the revenue generated from each user, grew marginally to Rs 146 from Rs 145 in the previous quarter (Q3FY24) and Rs 135 in same quarter last fiscal, primarily aided by change in entry-level plan and subscriber upgrades. Vi also mentioned that during the quarter, it posted the highest post-merger quarterly EBITDA of Rs. 2,180 crore; up 5.4 percent on YoY basis.

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