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for Industry - Other Telecom Services
Indus Towers’ (Indus) Q4FY25 performance was good led by, excluding acquisition, tenancy addition of 8.2k, which was much better than tower net adds of 4.3k, implying a rising tenancy sharing ratio. Tenancy adds benefitted from network rollout by VIL; and 2) strong FCF in FY25, including provision reversals.
Indus Towers’ (Indus) Q2FY25 performance was good on two counts: 1) stable net tenancy addition at 4,308 with some benefit already showing from VIL/BSNL rollout; and 2) strong cash collection, including INR 10.8bn collected towards past overdue.
We met Vikas Poddar, CFO of Indus Towers (Indus) on 27 Jun’24. Takeaways: 1) Indus remains excited about growth in the tower industry driven by rural expansion by Bharti, and 4G rollout from VIL. It expects a fair share in VIL’s expansion, despite the risk of higher competitive intensity
Our valuation for Indus now bakes in the VIL capex. Our recalibrated model envisions Indus’ rental revenue/EBITDA/ net profit CAGRs of 9.3%/10.2%/14.4% over FY24–27E.
Indus Towers’ (Indus) Q1FY24 performance was good on two counts: 1) tenancy addition accelerated with a net add of 5,048 despite 518 exits; and 2) there was no provisioning that had marred EBITDA previously. We believe the high rate of tenancy addition is unlikely to sustain as Bharti is close to completing its rural 4G rollout; 5G rollout over the next 12 months will largely come as loading.
Consolidated revenue stood at Rs36.0bn (-1% qoq, -1.7% yoy). Rental revenues stood at Rs20bn, down 8% yoy (3.4% below estimates). Energy reimbursements increased 1% yoy and was down 3.4% qoq (3% below estimates). Rental revenues for 3Q and 4Q are adjusted for exit penalties of Rs550mn and Rs997mn, respectively. Net tenancies, on a consolidated basis, declined by 1725 vs. 63 in the last quarter. Consolidated EBITDA was Rs14.9bn (-0.9% qoq, -6.4% yoy). EBITDA margin stood at 41.4% (-206bps yoy and +10bps qoq). Other...
We maintain Neutral on BHIN (after upgrading from Sell in 4QFY18) as (a) stock has corrected by ~40% from peak (b) on account of savings on DDT and earnings accretion from Indus acquisition and (c) prognosis for rental renegotiations though a risk but weak. Bharti Infratels (BHIN) 1QFY19 operating performance was weak with 4,818 net tenancy losses. Gross tenancy additions too were weak at meager 838. BHIN has lost 19k net tenancies in last three quarters. But, BHIN is yet to see the impact of ~6.7k tenancy loss on financials as it has received termination notices but services continue. Thus, revenue and EBITDA were better than expected.
Reiterate Sell with TP of Rs 305 (earlier Rs 310). Bharti Infratels (BHIN) 2QFY18 revenue and EBITDA were in-line. Highest ever loss of 6,612 tenancies was the key negative. BHIN has treated 5,601 tenancies as churn though the actual exits hasnt yet happened. Instant loss of tenancies on merger of Voda-Idea is the key negative trigger that would lead to further multiple de-rating of BHIN. These could impact BHINs EBITDA by ~15% and EPS 25%.
In absence of details of mix of tenancy losses, timing and event uncertainties, our numbers are on business-as-usual basis. But, we provide the impact of each of the events separately. Bharti Infratels (BHIN) share price has declined from a peak of Rs 480 to Rs 373 (22%) in last two months. Despite recent decline, we reiterate our Sell rating with revised TP of Rs 310 (vs. Rs 387). Our TP is based on 20x Dec-19E EPS (Rs 356) for business as usual (vs. 24x earlier) less impact of Rs 60/sh from Voda-Idea merger (vs. Rs 39/sh earlier) and likely acquisition of Voda-Idea stake in Indus at EV of Rs 5mn/tower (+Rs 15/sh).
BHIN is currently trading at 11x and 10x FY19/20E EV/e. Sell with a TP of Rs 387 @ 10x Sep-19E EV/e Bharti Infratels (BHIN) 2QFY18 revenue and EBITDA were in-line, led by higher energy margin. But operating performance was weak owing to feeble rental/tenant and the meagre new tenants addition. Street optimism on BHIN is driven by the prospect of better capital allocation via the likely acquisition of Vodafone and Ideas stake in Indus. This may be followed by BHINs parent Bharti diluting in favour of a consortium of investors. We dont see this as a game-changer, except for plugging the DDT leak.
