Emkay Global Financial's report on Indus Towers
Indus Towers posted 2.7% qoq revenue growth in Q4, helped by the provision reversal of Rs5.5bn (Rs1.8bn in Q3FY22). Excluding the reversal, revenue missed our estimates, with weak tower and tenancy additions of 699 and 685, respectively. EBITDA margins jumped 369bps qoq to 57.1%, while adjusted margin was flat on lower other opex. Energy margins, at -1.2%, remained negative for the eighth quarter in a row. Dividend payout impacted by lower cash conversion due to delayed payments from VIL. Receivables declined by only Rs2.9bn, despite receiving Rs33.7bn from VIL, as payment delays on incremental billing continue. MSA renewal has been concluded with one customer with a rental discount; revenue loss will be recouped from incremental tenancies.
Outlook
The dependency on a single customer for growth and rental discounts will keep operating performance under pressure. We trim FY23/FY24E EBITDA by 2.4%/2.5% and retain Hold with a revised TP of Rs205 (Rs270 earlier), cutting target multiple to factor in higher CoE.
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