Indus Towers Q3 results review, Yes Securities

Indus Towers Ltd. reported sequentially weak performance for the quarter. While adjusted revenue growth was broadly inline with estimates; Ebitda margin was below expectation.

It reported decline in revenue by 15.1% QoQ, as Q2 FY23 revenue included Rs 11 billion of deferred revenue. There was sequential decline in Ebitda margin (down 1777 basis points QoQ) led by provision on doubtful debts of Rs 22 billion for the quarter. Average sharing factor for the quarter was flat at 1.80 times. The precarious financial condition of Vodafone Idea Ltd. continues to weigh down on Indus Towers.

We expect return of stability in telecom sector on account of reforms announced by the Union government to drive tower/ colocation addition led by demand for increase in 4G coverage/capacity.

Also, the implementation of 5G would drive the addition of small cells and would unlock opportunities for it. However, it needs to be seen how the 5G related opportunities shape up in coming quarters.

The dividend yield of ~7%‐8% offers protection from downside. We estimate revenue compound annual growth rate of 2.0% over FY22‐24E with average Ebit margin of 22.0%. Bloomberg