Vodafone Idea Ltd. share price target

Adjusted EBITDA (excluding a one-off expense of INR3b on a pre Ind AS 116 basis) was up 15% QoQ (9% beat) due to strong cost rationalization, reducing SG&A; by 32% QoQ as subscriber churn significantly decelerated. VIL's liquidity, ability to invest on its network as well as protect its market share is constrained by the humongous net debt of INR1,171b and meager FY22E EBITDA of INR107b (pre Ind AS 116), thus dependent on a further fund raise. We change our rating from Under Review to Neutral....

Vodafone Idea (VIL)'s adjusted EBITDA (pre-Ind-AS 116) was up 6% QoQ to INR16.3b. Revenue edged up 1% QoQ (in-line) and ARPU improved 4%, offset by continued subscriber churn. With ballooned net debt of INR1,145b (incl. AGR liability) and meager INR17b quarterly EBITDA (3QFY21 pre-Ind-AS 116), we maintain VIL Under Review until there is further clarity on the liquidity situation improving. Financials & Valuations (INR b)...

Weakness was seen across KPIs. The overall subscriber base declined by ~8 million to 271.8, with churn rate increasing to 2.6% (vs. 2.0% in Q1FY21). The 4G sub base saw a modest addition of ~1.5 mn QoQ to 106.1 million. Even the post-paid sub base at 21.2 mn was down by 0.3 mn QoQ, clearly reflecting the weak competitive positioning. We note that ARPU growth of 4.4% QoQ, was largely owing to benign base of Q1, wherein recharge unavailability and extension had led to decline. Similarly, capex at | 1040 crore (vs. ~| 600 crore) was underwhelming, considering coverage/capacity...

Further cost optimisations, coupled with higher ARPUs backed by higher prices, and a probable equity infusion is required to support company's survival in the coming months. We reiterate our HOLD rating with a revised TP of Rs. 9.3 based on 7.3x FY22E EV/EBITDA. EBITDA rises, bottom-line continues to be in red on provisions Q1FY21 revenue dropped 5.4% YoY to Rs. 10,659cr, primarily due to erosion of subscriber base and the consequent decline in ARPU. On the other hand, EBITDA grew 12.3% YoY to Rs. 4,098cr, as EBITDA margins expanded 540bps YoY to 38.4% owing...

Weakness was seen across KPIs. ARPU decline of ~6% QoQ, vis--vis peers who reported ARPU growth, was owing to extension of validity of low cost customers during lockdown, SIM consolidation by its customers and postpaid sub base decline. The subscriber base fell by 11.3 million to 279.8 mn. The 4G sub base saw a modest decline of ~1 mn QoQ to 104.6 mn, clearly reflecting pressure on its high paying customers. Even the post-paid sub base at 21.5 mn was down by 1.5 mn QoQ, owing to fall in POS connections where SIM was requested to be put in safe custody by customers. Cost rationalisation plan of | 4000 crore in next 18 months...

Margins improve, profit slips on high provisions Vodafone Idea Limited operates as a telecom service provider. The Company offers 2G, 3G, and 4G mobile services, as well as mobile payments, advanced...

Supreme Court of India passed an order in favor of the DoT on a long pending industry-wide case of the definition of Adjusted Gross Revenue (AGR). On November 20th, a two-year moratorium was announced on the...

Q4FY19 being a seasonally strong quarter, results were very good and most managements were sounding positive about the outcome of the elections and the recovery thereafter. Their tone resonated hope. Q1 has typically been a seasonally weak quarter. We heard post result conference calls of nearly 35 small and mid cap companies across sectors; and it was hard to miss the sharp change in the tone and the commentaries...

Q4FY19 being a seasonally strong quarter, results were very good and most managements were sounding positive about the outcome of the elections and the recovery thereafter. Their tone resonated hope. Q1 has typically been a seasonally weak quarter. We heard post result conference calls of nearly 35 small and mid cap companies across sectors; and it was hard to miss the sharp change in the tone and the commentaries...

Given uncertainty around successful integration and potential downside, we recommend REDUCE rating on the stock with a target price of Rs. 5.4 based on ~8x FY21E EV/EBITDA. Topline impacted by reduced customer base In Q1FY20, Company's revenue declined 4.3% QoQ to Rs. 11,270cr, primarily on decreased subscribers base (-4.2% QoQ to 320.0mn). However, 4G data subscriber base witnessed growth of 5.1% QoQ to 84.8mn in Q1FY20. Blended churn ratio during the current quarter stood at 3.7% compared to 7.2% in Q4FY19. Overall ARPU...