Hold Indus Towers: target of Rs 245: ICICI Direct

ICICI Direct's research report on Indus Towers

Indus Towers (erstwhile Bharti Infratel) reported numbers for the merged entity for the first time in Q3FY21. Therefore, numbers were not comparable to earlier reported numbers of Infratel. Like to like revenues (on a proforma basis for merged entity) came in at Rs 6736 crore, up 5.9% QoQ led by core rental revenues which came in at Rs 4314 crore, up 7.4% QoQ. The energy revenues came in at Rs 2422 crore, up 3.5% QoQ, given the higher diesel prices. The rental numbers growth is optically higher as it includes exit penalty of Rs 400.2 crore. Proforma like to like EBITDA came in at Rs 3552 crore, up 15.6% QoQ, with EBITDA margins at 52.7% (up 440 bps QoQ) aided by exit penalty and one-time benefit of Rs 80 crore due to merger. Like to like proforma PAT came in at Rs 1360 crore (up 20.3% QoQ).

Outlook

We maintain our HOLD recommendation with a revised target price of Rs 245/share (earlier Rs 220), implying 5.5x FY23E EV/EBITDA (vs. 6x FY22E EV/EBITDA, earlier).