Hold Indus Tower; target of Rs 178: ICICI Securities

ICICI Securities research report on Indus Tower

Indus Towers’ (Indus) Q2FY24 performance was good on two counts: 1) tenancy addition accelerated with net add of 5,583 despite 840 exits; and 2) there was no large provisioning that had marred EBITDA previously. However, rising single-tenancy towers are continuously diluting margins and RoCE, and VIL has to significantly recover to increase visibility on rising tenancy sharing over medium term. We don’t see immediate collection risk for Indus, however going concern status may still be at risk for VIL in medium term. We have cut our EPS estimates by 2-5% over FY24E/FY25E.

Outlook

However, our revised DCF-based target price is INR 178 (earlier: INR 155) as we rollover DCF-based valuations to FY25E. We upgrade our rating to HOLD (from Reduce) on improving near-term performance.