Indus Towers share price slumps 7% on weak June quarter earnings; should you buy, hold or sell?

Indus Towers share price continued downward movement on Thursday after the company announced weak earnings for the quarter ended June on Tuesday. Consolidated net profit tanked 66% on-year to Rs 477 crore in the quarter as topline grew merely 1% to Rs 6,897 crore and operating profit shrank 34 to Rs 2,322 crore. In the previous session, Indus Towers shares fell as much as 6.6%. So far this year, the stock has plummeted over 18%, underperforming benchmark indices. Analysts remain sceptical on the stock given that the company continues to face challenges in collecting money from a weak customer, prompting a Rs 1,200 crore provision.

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Edelweiss: HoldTarget price: Rs 220

Analysts at Edelweiss Securities believe that Indus Towers continues to face challenges in collecting money from a weaker customer, prompting an Rs 1,200 crore provision. “While it is evaluating a payment plan, receivables would rise in the near term and the payment would come through post fund-raising,” they said. The brokerage retains hold rating on the stock with a target price of Rs 220 taking note of risks to long-term EBITDA sustainability. “Indus is trading at an attractive 4.2x FY24E EV/EBTIDA, but we expect MSA renewal to increase churn. Also, a significant portion of Indus’ revenue comes from operators with fragile balance sheets, adding uncertainty to long-term EBITDA sustainability,” they added.

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ICICI Direct: ReduceTarget price: Rs 195

ICICIDirect analysts stated that Indus’ share price has been down around 13% over the past five years owing to concerns over its key tenant (VIL) survival. “We await traction of potential growth in the adjacent areas such as small cells/ in building solutions etc. Despite, Vodafone Idea (VIL) survival, near term growth challenges remain with competitive renewals as well as delays from VIL for dues. We downgrade from ‘Hold’ to ‘Reduce’,” they said. In the medium term, opportunities in adjacent areas will drive growth along with overall tenancy demand from 5G transition, they added.

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