Shares of Vodafone Idea and Indus Towers took a massive dive after Goldman Sachs expressed concerns over the telecom companies
Vodafone Idea Share Price: Shares of Vodafone Idea and Indus Towers took a massive dive on September 6 after Goldman Sachs, in its latest research report, expressed concerns over the telecom companies.
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Shares of Vodafone Idea hit a three-month low of Rs 12.91, plunging 14 per cent on the BSE in Friday’s intra-day trade amid heavy volumes. The stock of the telecom services provider is trading at its lowest level since June 4, 2024.
In the past two months, the company’s stock has slipped 24 per cent after the company reported a mixed performance for the quarter ended June 2024 (Q1FY25).
A sharp decline was witnessed in the telecom company’s stock price today after Goldman Sachs maintained its ‘Sell’ rating on the stock with a target price of Rs 2.5 (earlier Rs 2.2), as the brokerage firm said that Vodafone Idea faces difficulties in achieving free cash flow break-even and recovering market share, according to media reports.
Meanwhile, after the successful follow-on public offer (FPO) of the company, it is in discussions with banks for a debt fund raise of Rs 25,000 crore.
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The company has planned a capex of Rs 50,000-55,000 crore over the next three years to strengthen its 4G network and launch 5G network across key sites.
It is expected that the customer churn should reduce significantly as a result of this planned capex program, according to analysts at Centrum Broking.
The brokerage firm expects that its planned capex program should help the company to improve its network capacity and reduce ongoing customer loss. Also, the recent tariff hike will help to drive revenue and earnings before interest, tax, depreciation and amortization (Ebitda) over the next two years.
Further, the brokerage firm, in its Q1FY25 result update, said, it maintains ‘Sell’ rating on the stock, with unchanged target price of Rs 11 per share, arrived through EV/Ebitda of 11.0x on FY26E estimates.
Vodafone Idea’s Q1FY25 print suggests that the company continues to underperform peers, pending acceleration in capex following the completion of fund raise, analysts at ICICI Securities said.
The company’s planned capex over the next three years will focus on expanding coverage and decongesting its network. Vodafone Idea believes it can start growing again with a fair share of subscriber addition, as it plugs the 4G coverage gap and starts adding more data capacity through 4G/5G expansion.
The company expects 67–75 per cent tariff hike benefits to flow to revenue in the next few quarters, the brokerage firm said.
Indus Towers’ shares fell over 6 per cent after Goldman downgraded the stock to ‘Sell’ from ‘Neutral’ rating, although it hiked the target price to Rs 350 from Rs 220. Goldman noted a disconnect between the company’s fundamentals and its current valuations while also saying that the recent re-rating of Indus Towers is overdone. The firm sees limited visibility on medium- and long-term growth prospects. Goldman Sachs would adopt a more constructive stance only if Vodafone Idea, one of Indus’s key clients, can successfully repair its balance sheet.
Notably, Indus Towers’ stock has surged over 75 per cent in the past six months and is currently trading at Rs 443, which is 26 percent above Goldman Sachs’ target price of Rs 350.
However, for Bharti Airtel, Goldman Sachs significantly raised its target price to Rs 1,700 from the previous Rs 900, indicating an upside of 10 percent from the stock’s current market price. The firm has also maintained its ‘Buy’ rating. The global brokerage said that strong growth and a turning point in free cash flow (FCF) and returns profile, warrant the stock’s premium valuation.
Goldman believes Bharti Airtel’s growth momentum will continue, driven by market share gains, organic growth levers, and potential future tariff hikes. The company’s India revenue and EBITDA are expected to grow at 16 per cent and 21 percent CAGR over FY24-27. Additionally, Goldman foresees Bharti Airtel achieving improvements in its balance sheet. The brokerage firm expects the company’s net debt to approach zero by FY28.
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