Indus Towers shares gain after 38% jump in Q2 profit

Indus Towers share price opened 2 percent higher on October 26, a day after the telecom infrastructure firm reported a 38 percent rise in consolidated net profit to Rs 1,559 crore for September 2021 quarter.

Indus Towers’ net profit was about Rs 1,131 crore in the year-ago period, according to a company statement. Recent reforms announced by the government for the telecom industry have sharply improved business sentiment.

The consolidated revenue of Indus Towers, formerly Bharti Infratel, during the September quarter stood at Rs 6,877 crore, up about 8 percent year-on-year.

The consolidated EBITDA, which came in at about Rs 3,641 crore in Q2 FY22, was 17 percent higher than the corresponding quarter of the previous year.

The stock was trading at Rs 297.45, up Rs 8.80, or 3.05 percent at 9.20 am. It has touched an intraday high of Rs 303.55 and an intraday low of Rs 292.

Global research firm CLSA has a maintained a “buy” rating on the stock and raised the target to Rs 330 a share. It is of the view that Q2 revenue and EBITDA were ahead of estimates and raised FY22-24 forecast by 3-5 percent, a CNBC-TV18 report said.

Indus Towers’ pro forma (post-merger) changed tenancy definition but underlying tenancy gross addition (3,584) and net addition (3,566) were steady. Low churn means reduced pain from VIL exits.

Tower addition continues to be strong at 2,465, driving tenancy addition. Incremental tenancy sharing was low at 1.45x, which implies rising single tenancy towers.

We are concerned about the sustainability of tenancy additions as Bharti Airtel and Reliance Jio recently bought huge spectrums, which may negatively impact capacity-led tenancy demand, a factor that drives the sharing ratio.

We do not see VIL significantly accelerating its tenancy expansion (refer) after relief package announced by the government.

We raise our EBITDA estimates for Indus Towers by ~1.6 percent each year for FY22E and FY23E on lower expenses and DCF-based target price to Rs 273 (from Rs 266) and maintain “hold” on the stock. MoneyControl