
Shares of Indus Towers Ltd surged over 2% on Wednesday after CLSA upgraded the stock to a ‘High Conviction Outperform’ rating, setting a target price of ₹575 per share. This represents a potential upside of 62.2% from its current market price of ₹354.50.
Key Drivers Behind the Upgrade:
- Reduction in Overdues: Indus Towers recently received an additional payment of ₹1,900 crore from Vodafone Idea (VIdea), significantly reducing overdue payments by over 70% from their peak levels. This payment has improved confidence in VIdea’s network expansion plans, especially in 4G and 5G.
- Robust Growth Outlook:
- CLSA forecasts a 25% expansion in tenancy for Indus Towers by FY27.
- The company is expected to achieve a 10% CAGR in EBITDA over the same period.
- The projected Return on Capital Employed (ROCE) stands at 23%, highlighting its efficiency in capital utilization.
- Free Cash Flow Strength:
- With strong free cash flow yields of 7%, Indus Towers is positioned as a compelling value proposition in the telecom infrastructure space.
Operational Highlights:
Indus Towers, with its extensive portfolio of 229,658 towers, relies heavily on Bharti Airtel and Vodafone Idea as anchor tenants. The recent financial progress with VIdea underscores the company’s ability to manage its partnerships while enhancing its financial standing.
CLSA’s Take:
- Rating: High Conviction Outperform
- Target Price: ₹575 per share
- Key Highlights:
- Strong tenant additions and cash flow visibility.
- Improved payment cycle from Vodafone Idea bolstering confidence.
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