Baking in Vi CapEx, Indus Towers downgraded to SELL by ICICI

Our valuation for Indus Tower Ltd. now bakes in the Vodafone Idea Ltd. CapEx. Our recalibrated model envisions Indus’ rental revenue/Ebitda/ net profit compound annual growth rates of 9.3%/10.2%/14.4% over FY24–27E.

That said, earnings per share growth will likely plummet to mid-single-digits soon after, succumbing to a more mature tower industry, which will entail incremental requirements drying up and offering limited growth opportunities.

We see Indus Tower’s free cash flow generation and dividend story taking shape FY27E onwards.

We lower WACC and lift the terminal growth rate for Indus – implies restoring Vodafone Idea’s going concern status that is yet to be established.

Our discounted cash flow-based target price is now Rs 260 (earlier Rs 200); however, current market price implies earnings growth of 10% over FY24E–31E – a stretched assumption. Downgrade to Sell (from Reduce).

ICICI Securities