Stock Of The Day: Indus Tower Signs Deal With NTPC Green Energy — Analyst Views, Key Levels
Here's how the deal with NTPC Green Energy benefit Indus Tower
Indus Towers Ltd. has entered into a deal with NTPC Green Energy to develop a renewable power project, in line with the need for pacing green energy objectives and the Government of India's efforts towards carbon neutral economy.
Shares of Indus Towers traded 3.02% higher at Rs 354.95, compared to the 0.6% loss in the Nifty 50 as of 10:50 a.m. The stock hit an intraday high of 4.38% at Rs 359.5 per share and has gained over 74% year-to-date
Key Levels To Watch
Key support: Rs 234 (five-day low)
Key resistance: Rs 359.5 (Today's high)
About The MoU
The memorandum of understanding signed on April 18 is to explore the joint development of grid-connected renewable energy-based power projects. These power projects will include solar, wind, energy storage solutions and more.
The MoU is in line with Indus Towers' aim to expand its renewable energy portfolio. The company plans to expand its portfolio in a phased manner to reach a gigawatt-scale capacity for its business operations spread across the country, as a part of its Net Zero commitments.
Benefit From Vodafone Fund Raise
Vodafone Idea Ltd.'s recent Rs 45,000 crore fund-raising plan will also benefit the company. According to IIFL Securities, the fund raise removes an overhang from a key client (Vodafone Idea) and stands to benefit from Vi's rollout. With Vodafone Idea's financials improving, the brokerage expects the company will no longer build a Rs 1,000 crore provision of doubtful debts per annum for Indus Towers.
IIFL Securities upgraded Indus Towers to a "buy" rating on the basis of this factor, with a target price of Rs 379 apiece, indicating a 10% upside to the previous close.
The brokerage also believes that Indus Towers would benefit from higher loading revenue and the addition of a second tenant on many of its towers. This tenancy ratio improvement would also improve the unit economics of Indus’ tower portfolio, according to the brokerage.
IIFL Securities also expects Indus Towers to reinstate its dividend in FY25. The brokerage estimates Rs 4,000 crore and Rs 6,500 crore of free cash flow generation in FY25 and FY26, respectively.
Potential MSCI Inclusion
Indus Towers year to date gain of over 74% is also fueled by its possible inclusion in the MSCI Index. According to Nuvama Wealth, the stock could receive potential inflows of $189 million from passive funds that track MSCI indices.
Furthermore, the stock has already met all the conditions it needs to be considered for the inclusion in MSCI indexes in the next review, according to the Nuvama
Street View
The views of various brokerages have been positive on Indus Towers. Recently Citi upgraded its target price on the stock to Rs 390 apiece from Rs 320 apiece earlier, implying a 13.2% upside.
The raise came on the back of increase in Citi's tenancy forecasts for the company, expectations of full recovery of Vodafone Idea's past dues to the company and a higher target EV/Ebitda multiple of 8-times vs. 7-times previously.
Of the 23 analysts tracking the company, 11 maintain a 'buy' rating, six recommends a 'hold' and six suggest a 'sell', according to Bloomberg data. The 12 month consensus return potential of the stocks stands at a negative 28%.