Vodafone Idea still no timeline for 5G implementation, Yes Securities

Vodafone Idea Ltd. reported inline performance for the quarter. Both, sequential revenue growth and Ebitda margin were as per expectation. It reported sequential revenue growth of 0.6% QoQ, led by 2% QoQ increase in average revenue per user to Rs 142/month; while, subscriber base declined by 1.6 million QoQ to 219.8 million.

4G addition was better than expected for the quarter at 1.8 million QoQ. There was sequential improvement in Ebitda margin (up 95 bps QoQ) led by decrease in marketing cost.

Net debt increased to Rs 2.13 trillion versus Rs 2.12 trillion as of Q1 FY24.

It continues to lose subscribers (mainly in 2G segment) and that adversely impacts revenue growth.

The addition of 4G subscribers remains modest. It needs capital infusion for augmenting the capital expenditure to catch up with peers in terms of 4G coverage/capacity.

Vodafone Idea has still not announced any timeline with regard to 5G implementation.

We expect that 2G to 4G migration would continue to drive average revenue per user growth. We expect Ebitda margin to improve in near term led by continued focus on operational efficiency.

We estimate revenue compound annual growth rate of 7.6% over FY23‐25E with average Ebitda margin of 41.1%.

We maintain our ‘Sell’ rating on the stock with target price of Rs 8/share based on enterprise value/Ebitda of 9.0 times on FY25E.

The stock trades at EV/Ebitda of 15.3 times/12.9 times on FY24E/FY25E. Bloomberg