Neutral Indus Towers; target of Rs 245: Motilal Oswal

Motilal Oswal's research report on Indus Towers

Indus Towers (INDUSTOW) reported healthy revenue/EBITDA growth of 5.9%/15.6% QoQ owing to a high exit penalty of INR4b and healthy 4.2k tenancy adds. However, EBITDA grew at just 3% QoQ, excluding the exit penalty changes. n Our estimates are now realigned with that of the merged entity – which now includes Bharti Infratel, along with 100% of Indus Towers (v/s only 42% earlier). Subsequently, we estimate an LTL FY21–23E revenue/EBITDA CAGR of 4.3%/5.5%.

Outlook

We factor in a revenue/EBITDA CAGR of 4.3%/5.5% over FY21–23E and roll forward our valuation to FY23 to arrive at TP of INR245 – implying EV/tenancy of 1.9m and EV/EBITDA of 5.7x and P/E of 11.6x. The stock garners healthy dividend yield of 6%, which could cushion against a further downside. Maintain Neutral.