Neutral Indus Towers; target of Rs 170 : Motilal Oswal

Motilal Oswal's research report on Indus Towers

Indus reported 1.4% QoQ EBITDA growth (in line), led by 5% consolidated revenue growth as energy revenue grew by a sharp 10% QoQ. Rental revenue saw moderate 2% QoQ growth (in line) on 1.5%/0.7% QoQ growth in tenancy/rentals rates. Indus is benefiting from the aggressive site adds from Bharti along with 5G rollout, but being single tenancy sites, it could alter the return profile despite adding linear (single tenant) sites. Further, VIL’s weak outlook and limited funding capability could a.) dilute tenancies in the near term, b.) put risk on the long-term tower sharing-led business model. Subsequently, we reiterate our Neutral rating on the stock.

Outlook

We factor EBITDA growth of 50/7% in FY24/25E on a low base on FY23, due to VIL write offs, arriving at our TP of INR170, implying an EV/tenancy ratio of INR1.8m and an EV/EBITDA ratio of 2.9x. We reiterate our Neutral rating on the stock.