Vodafone Idea Shares: ICICI Securities Lowers Target Price
ICICI Securities has revised its target price for Vodafone Idea shares, providing insights into the company's performance and market outlook.
Securities
Following an analyst call with Vodafone Idea management, ICICI Securities reported that the telecom operator remains optimistic about resolving the arithmetic error in the AGR dues calculation and is actively engaging with the government on this issue. This comes even after the Supreme Court's rejection of the curative petition concerning AGR dues.
According to ICICI Securities, Vodafone Idea Ltd believes its case has strong merit, and the ongoing dialogue with the government has been encouraging. The company is accounting for ₹29,000 crore of government debt that is set to be converted into equity at the end of the moratorium period, as outlined in the reform package.
Vodafone Idea has not included an AGR resolution in its business plan, meaning that the rejection of the curative petition will not hinder its recovery efforts, as noted by ICICI Securities.
In light of this, ICICI Securities has revised its estimate for AGR relief from ₹35,000 crore, pushing it from FY25 to FY26, and has also accelerated capex to FY26. Consequently, this has resulted in adjustments to its net profit estimates for FY25–27E while leaving the EBITDA estimates for Vodafone Idea in the comparable period unchanged.
With the risk of AGR resolution increasing, ICICI Securities has reduced its EV/EBITDA multiple from 14 times to 13 times FY27 and adjusted its target price from ₹15 to ₹11. The brokerage has maintained a 'Hold' rating on the stock. Meanwhile, MOFSL has set a target price of ₹12 with a 'Neutral' rating.
ICICI Securities noted, "Vodafone Idea Ltd (VIL) is nearing the closure of ₹25,000 crore in debt funding, along with an additional ₹10,000 crore for non-fund facilities, which should help enhance capex. VIL has also signed agreements with major equipment suppliers worth ₹30,000 crore for radios to be delivered over the next three years, with capex expected to begin in November 2024. Additionally, VIL anticipates another tariff hike of 15–20 percent within the next 15 months."
"We anticipate a revenue and EBITDA CAGR of 11% and 31%, respectively, over FY24-26E. Based on a 14 times EV/EBITDA multiple and net debt considerations, we arrive at a target price of ₹12. A reduction in the subscriber churn rate could be a significant catalyst for the stock. We maintain our Neutral rating on the stock," stated MOFSL.
