IGI Logo

Result Synopsis

Indus Towers (INDUSTOW) reported inline performance for the quarter. The sequential revenue growth and EBITDA margin were as per expectation. It reported revenue growth of 0.9% QoQ, led by 2.0% QoQ increase in the number of colocations and 1.7% QoQ decline in average sharing revenue per sharing operator. Core sharing revenue increased QoQ to Rs 44,131mn. There was sequential increase in EBITDA margin (up 185 bps QoQ) on account of lower power and fuel cost. Average sharing factor for the quarter was 1.72x vs 1.74x in previous quarter.

The precarious financial condition of VIL continues to weigh down on Indus Towers. We expect that densification of 4G network and rollout of 5G services would drive business growth for it. The accelerated rollout of 5G in India offers strong visibility for business growth for next two years. Also, operating margin is expected to remain strong led by focus on optimizing power and fuel cost. We estimate revenue CAGR of 4.7% over FY23?26E with average EBITDA margin of 45.7%. We maintain our ADD rating on the stock with revised target price of Rs 263/share based on PER of 10.0x on FY26E. The stock trades at PER of 9.6x/8.8x on FY25E/FY26E EPS.

Result Highlights

Revenue increased by 0.9% QoQ to Rs 71,990 mn, led by 2.0% QoQ increase in the number of colocations and 1.7% QoQ decrease in average sharing revenue per sharing operator. Core sharing revenue increased QoQ to Rs 44,131mn.

EBITDA margin increased by 185 bps QoQ to 50.3% on account of lower power and fuel cost (down 2.1% QoQ). Other Expenses include provision for doubtful debts of Rs 2,270 mn.

Total number of towers grew by 3.7% QoQ to 2,11,775. Total number of colocations grew by 2.0% QoQ to 3,60,679. Average sharing revenue per sharing operator per month increased by 1.3% QoQ to Rs 41,454.

Average sharing factor for the quarter declined to 1.72x from 1.74x in Q2FY24.

Capex for the quarter was Rs 26,528 mn vs Rs 22,897 mn for Q2FY24.

Net debt (with lease liabilities) decreased to 198.2bn from Rs 203.5bn in Q2FY24.

KEY CON-CALL HIGHLIGHTS

400,000 5G BTS have already been deployed and the average 5G rollout remained at ~7,000/week.

According to Ericsson, global 5G subscription is expected to reach 1.1bn by end of 2023 and cross 5bn milestone by end of 2028. India 5G subscription expected to reach 700 Mn by end of 2028.

Collection from VIL remain in line with the billing amount. Rs 3 bn was collected on account of outstanding past dues in addition to 100% of the monthly collection.

Q3 FY23 had an impact of Rs. 2,270 crores due to provision for doubtful debts and Rs. 493 crores from an exceptional item.

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632