Indus Towers share price: Neutral on Indus Towers, target price Rs 250: Motilal Oswal
Indus Towers Ltd., incorporated in 2006, is a large cap company (with a market capitalization of Rs 59,854.55 Crore) operating in the telecommunications industry.
For the quarter ended 30-06-2021, the company reported consolidated total income of Rs 6,853.90 crore, up 4.34% from last quarter total income of Rs 6,569.10 crore and up by 314.91% over the total income for the same quarter of last year of Rs 1,651.90 crore. The company reported after-tax net profit of Rs 1415.30 Crore in the last quarter.
Justification of the investment
The long-term network upgrade opportunity in the telecommunications sector to 5G, fiber, small cell and indoor coverage would continue to drive the growth of the passive telecommunications infrastructure sector. The recovery in rents and the reduction in outflows have also resulted in income stability. However, starting with FY23E, VIL exit penalty revenue would decrease. In addition, its situation remains precarious, weighed down by soaring debt and its inability to raise funds and improve its liquidity. This remains the biggest overhang for Indus Towers as VIL remains a big customer and the tower sharing business has a limited business case for single tenant operations. On the other hand, the threat of RJio’s increased concentration in the tower infrastructure space could weaken Indus’ positioning. The brokerage takes into account an income / EBITDA CAGR of 5.1% / 6.8% over the years 21-23E and arrives at a TP of 250 INR – which implies an EV / rental of 2m and an EV / 5.7x EBITDA. The stock has a good dividend yield of 10.4%, which could cushion a further decline.
Promoter / FII Holdings
The promoters held 69.9% of the company’s capital as of June 30, 2021, while the FIIs held 26.8%, the DII 2.7% and the public and others 0.7%.
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