Neutral Indus Towers; target of Rs 197: Motilal Oswal

Motilal Oswal's research report on Indus Towers

INDUSTOW’s 2QFY23 performance was weighed down by higher provisions (INR17.7b), along with INR11b in write backs. Adjusted for the same, revenue/EBITDA stood flat at INR69b/INR45b. IDEA-related provisions ballooned to INR30b, highlighting the liquidity risk posed by it. IDEA has proposed a substantial monthly billing until Dec’22 and the balance by Jul’23, subject to its capital infusion plans. We expect an EBITDA CAGR of a mere 2% over FY22-24, with a risk of falling tenancies, despite the optimism around 5G-led tenancy additions. Subsequently, we maintain our Neutral rating.

Outlook

We factor in a revenue/EBITDA CAGR of a mere 2% over FY22-24 to arrive at our TP of INR197, implying an EV/tenancy ratio of INR2m and an EV/EBITDA ratio of 4.6x. The stock garners a healthy dividend yield of 5% (FY22), but the management said it will be a function of FCF, which remains at risk. We maintain our Neutral rating.