17 Jan , 2025 By : Debdeep Gupta
Hong Kong-based brokerage CLSA added telecom player Indus Towers Ltd. to its 'high conviction' list, indicating increased bullishness on the counter.
The brokerage upgraded the counter to a 'high conviction' outperform, with a target price of Rs 575 per share, which implies a whopping 62 percent upside from the previous session's closing price.
At 9.35 am, shares of Indus Towers were quoting Rs 358.6, up 1.2 percent on the NSE.
Indus Towers recently received Rs 1,900 crore from Vodafone Idea. VI utilized funds that were raised through a recent preferential equity issuance to its UK co-promoter, Vodafone Group Plc to pay back the dues.
CLSA noted that Indus Towers' overdues from Vodafone Idea are down over 70 percent from the peak. The lower overdues are adding confidence to its planned 4G/5G network investment.
At the current juncture, Indus Towers offers a 10 percent EBITDA CAGR, strong cashflows, an FCF yield of seven percent, along a 23 percent RoCE by FY27.
Earlier this month, Citi Research reaffirmed its bullishness on Indus Towers, amid the government's bank guarantee waiver which is a 'major relief' to Vodafone Idea. The waiver also has a positive effect on Indus Towers, and any progress on Vodafone Idea's debt funding will be a key monitorable going forward.
Following the update, the brokerage sees improved visibility of Indus Towers reinstating dividends in Q3 or Q4 of FY25. Indus Towers' declining capex is aiding free cash flow generation. There is an upcoming pickup in tenancies from Vodafone Idea starting Q3, with a possible inflection in tenancy ratio from Q4, added to the brokerage.
Over the past 12 months, shares of Indus Towers have soared 70 percent, while the benchmark Nifty 50 has gained 7.5 percent during the same period.
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