Indus Towers Ltd. share price target

Update Note

Indus’ 2QFY25 reported financials came in ahead of our estimate owing to a higher-than-estimated reversal of prior period bad debt provisions (INR10.8b vs. our estimate of INR5b).

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.

Indus Towers’ (Indus) Q1FY25 performance was good on two counts, Strong net tenancy addition, at 6,340, despite 310 exits and strong cash collection.

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

Indus Towers (Indus) reported a flat revenue QoQ, but provision write-offs
and lower power costs led to 14%/20% QoQ growth in EBITDA/PAT (a beat
of 12%/41%). The tower additions were led by only one operator, which
moderated the ASF.

Reported rental revenue up 7.7% YoY/2.2% QoQ to INR 45.8bn in Q4FY24.

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) Q2FY24 performance was good on two counts: 1) tenancy addition accelerated with net add of 5,583 despite 840 exits; and 2) there was no large provisioning that had marred EBITDA previously. However, rising single-tenancy towers are continuously diluting margins and RoCE, and VIL has to significantly recover to increase visibility on rising tenancy sharing over medium term.

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.

Indus Towers’ (Indus) Q4FY23 performance was good on two counts – 1) tenancy addition accelerated with net add of 3,396 despite 512 exits; and 2) no provisioning, that had marred EBITDA in previous three quarters due to delay in VIL receivables.

Indus Towers’ (Indus) Q3FY23 performance was yet again marred by provision (of Rs23bn) for doubtful debt and reversal of revenue from equalisation of Rs5bn (as exceptional loss). This has resulted in the company reporting a net loss of Rs7bn. Indus has taken a provisional impact of Rs53bn in past three quarters.

Indus Towers’ Q2FY23 result had two one-offs: 1) Settlement gain received was
Rs11bn of which Rs5.5bn was recognised in rental revenue thus, rental was
inflated;