4 July 2024 Punjab Khabarnama : We met Vikas Poddar, CFO of Indus Towers (Indus) on 27 Jun’24. Takeaways: 1) Indus remains excited about growth in the tower industry driven by rural expansion by Bharti, and 4G rollout from VIL. It expects a fair share in VIL’s expansion, despite the risk of higher competitive intensity. Indus sees an advantage from its strong tall tower portfolio, good footprint in past VIL radio frequency planning, strong execution track record, and reward for support during challenging times. Nonetheless, it remains cautious on competition. 2) The company believes it has the core strength in managing space and power; and data center fits well into their ecosystem. However, it has not had a discussion with Bharti on the merger of Nxtra. 3) Indus expects higher capex intensity to continue in FY25 due to strong tower/tenancy expansion anticipation; however, recovery of overdue from VIL could aid FCF/dividend payout in FY25.
Outlook
We have retained our estimates for Indus, and DCF-based target price of INR 270. Our model assumes Indus’ cash EBITDA to grow at CAGR of 7% over FY24–31E; terminal growth estimated at 2.5% and WACC is 12.1%. At target price, Indus’ implied valuation works out to 5.4x FY26 EV/adj. EBITDA and 10.5x FY26E EPS. Maintain SELL.