Neutral Indus Towers; target of Rs 210: Motilal Oswal

Motilal Oswal's research report on Indus Towers

Indus reported revenue/adj. EBITDA growth of 1%/3% QoQ (in line), led by strong tower/rental adds of 7.6k/7.2k and INR3b in provision write-backs. Rental EBITDA grew 3% QoQ. PAT growth was strong at 19% QoQ, led by lower power costs, and interest income for delayed payments. The company is benefiting from aggressive site adds by Bharti and the 5G rollout. However, since these are single-tenancy sites, they could drive higher capex, which alters the return profile despite adding linear (single tenant) sites and reduces FCF. Further, VIL’s weak outlook and limited funding capability could dilute tenancies in the near term and raise concerns about its long-term tower sharing-led business model. Subsequently, we reiterate our Neutral rating.

Outlook

We factor in revenue/EBITDA growth of 5/6% in FY24-26E and arrive at a TP of INR210, implying an EV/tenancy ratio of INR1.6m and an EV/EBITDA ratio of 3.9x. We reiterate our Neutral rating on the stock.