Add Indus Towers Ltd For Target Rs. 280 - Yes Securities
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Result Highlights
* Reported overall inline performance with revenue of Rs 64.9 bn, up 3% YoY, The growth was led by 5.7% YoY increase in rental revenue to Rs 41.4 bn; while the energy spread remained negative for the quarter at (‐1%).
* The number of colocations grew by 1.3% QoQ (up 3.6% YoY) to 322,438; and the sharing revenue per sharing operator per month grew 2.7% YoY to Rs 42,477 ( not comparable QoQ as Q3FY21 revenue had significant exit penalty contribution).
* Tower addition remained very strong at 3,715 addition in the quarter, led by demand from telecom operators for better network coverage. The average sharing factor was 1.81x compared to 1.82x in Q3FY21. (slightly impacted due to higher tower addition)
* EBITDA margin declined by 100 bps QoQ to 52.6% inspite of strong cost control measures, due to sequential decline in revenue by 3.6% QoQ (led by lower exit penalty contribution).
* PAT grew 0.3% QoQ led by lower depreciation and lower tax expense in the quarter.
* The phase of pressure on the number of co‐locations is largely over and the number of colocations is expected to see consistent growth going ahead, led by network capex on the part of telecom operators to meet higher data/coverage demand.
Our view: Overall, the operational performance was strong led by healthy addition in collocation and towers; sharing revenue per tenant has stabilized and would grow with improvement in the financial health of telecom operators. The densification of towers required for improving 4G coverage/ capacity and the implementation of 5G network would drive the addition of BTS/towers. The dividend yield of around 5‐6% offers protection from downside. The telecom sector has now stabilized(compared to the situation a year ago) with 3 private +1 public player. However, the precarious financial situation of Vodafone idea is a risk factor. Trades at PE of 10.3x on FY23 earnings
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