Indus Towers Update - Client’s Financial Distress, Key Concern: Reliance Securities
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Reliance Securities Report
Looking ahead, Reliance Securities expects Indus Towers Ltd.’s revenue growth rate to slow down to 3% CAGR over FY20-FY24E.
We expect co-locations to be added at run rate of 8,000/year, which will dilute its tenancy ratio to 1.8x.
While we expect Ebitda and EPS to clock 3%/5% CAGR each over FY20-24E, we expect its Ebitda margin at 50% in FY24E.
In light of decadal low tower tenancy ratio, no scope for further rise in rentals, likely client concentration risk, delay in tariff hike and launch of 4G/5G-enabled smart phones by Jio + Google, we initiate coverage on Indus Tower with SELL and a DCF-based 2-Year Target Price of Rs 201 at implied valuation of 3.5x EV/Ebitda of FY24E.
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