Sell Vodafone Idea; target of Rs 6: ICICI Direct

ICICI Direct's research report on Vodafone Idea

Vodafone Idea’s (VIL) Q1FY21 performance was a reflection of its continued weakness in terms of sub-par subscriber quality, lag in 4G network, balance sheet stress. Revenues at Rs 10,659 crore fell 9.3% QoQ, with ARPU at Rs 114 (down ~5.8% QoQ, largely due to weak underlying sub base, Covid-19 led validity extension), coupled with net loss of 11.1 million (mn) customers. EBITDA (excluding Ind-AS 116 impact), adjusted for one-offs was at Rs 1540 crore, down ~10% QoQ and adjusted margin of 14.4%, down 20 bps QoQ.

Outlook

We reinstate our ratings and assign SELL with DCF based target price of Rs 6/share. Any plans of fund infusion (~Rs 10000+ crore) along with sharp tariff hike/floor tariff decision will be a key risk to our call.

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