Motilal Oswal's research report on Indus Towers
INDUSTOW’s 3QFY23 performance continued to be adversely impacted by VIL. Its inability to raise funds increased provisions (INR23b), revenue equalization write-off (INR663m), and reversal of INR11b in the last quarter. Adjusting for the impact, revenue/EBITDA declined 1% QoQ to INR68b/INR35b, respectively. VIL’s risk of survival puts uncertainty towards Indus Towers outlook. We expect Revenue/EBITDA CAGR of 1%/25% over FY23-25, respectively, with a risk of falling tenancies, despite the optimism around 5G-led tenancy additions. Subsequently, we reiterate our Neutral rating.
We factor in a revenue/EBITDA CAGR of 1%/25%, respectively, over FY23-25 to arrive at our TP of INR174, implying an EV/tenancy ratio of INR1.3m and an EV/EBITDA ratio of 3.2x. The stock had garnered a healthy dividend yield of 5%, (FY22) but given the reversal in VIL revenue, not recognizing 3QFY23 revenue and uncertainty in receivables, would pose risk on the company financials. We reiterate our Neutral rating on the stock.
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