Vodafone Idea Ltd. share price target

Vodafone Idea’s (VIL) Q1FY23 cash EBITDA at Rs21bn was slightly lower QoQ on higher costs. ARPU rose 3.2% QoQ to Rs128; it was better on one-additional day. 4G add remained muted on pending 4G capex, and the company is gradually expanding capacity through refarming 3G sites to 4G.

Vodafone Idea’s (VIL) Q4FY22 cash EBITDA at Rs21.2bn was higher than our estimate due to a one-off gain, while revenues came in-line. ARPU rose 7.8% QoQ to Rs124 and VIL said most part of tariff hikes taken in Nov’21 is captured in the revenues. Future ARPU growth will depend on 4G net sub-add, monetisation of digital properties and more tariff hikes.

Debt to equity conversion should aid deleveraging efforts. However, IDEA needs to work on increasing net additions and reducing churn rate of existing base. Hence, we provide HOLD rating on the stock with a rolled forward TP of Rs. 11.8 based on 9.7x FY24E EV/EBITDA. Topline sees small gains; Margins shrink on higher costs Q3FY22 consolidated revenue grew 3.3% QoQ to Rs. 9,717cr (-10.8% YoY) aided by gradual enhancement in ARPU levels (+5.5% QoQ to Rs. 115). However, overall subscriber base declined further to 247.2mn (vs. 253mn in Q2FY22), with the blended...

About the stock: Vodafone Idea (VIL) is India's third largest telecom operator with ~24.7 crore wireless customers in India. Given the balance sheet stress and delayed 4G network expansion, it lags the key listed peers in terms of 4G network coverage, ARPU and margins...

VIL posted a pre Ind AS 116 EBITDA of INR16.2b v/s INR14.1b QoQ (5% above our estimate) on the back of a 5.5% increase in ARPU, led by the recent tariff hike, which resulted in a higher churn at 5.8m. The recent government moratorium has partly offered it some respite from its repayment woes, but it has ceded 35% equity stake to the government for just the interest component, with its net debt ballooning to INR1,975b. The much awaited capital raise remains critical to provide immediate liquidity, given the low EBITDA of INR104.1b (pre-Ind AS 116) in FY23E even...

Following Bharti and after months of expectation, VIL finally announced a tariff hike to the tune of 20% across its price plans, effective from 25th Nov'21. It is now important for RJio to follow suit to ensure sustainability of the tariff hikes. VIL's ARPU, which stands at a mere INR109 (40% below Bharti), given the higher proportion of customers on lower base plans, could see a big push, provided it doesn't see a huge market share loss. This hike, catering to ~70% of its revenue pool, can potentially...