Indus Towers Falls After Goldman Sachs Rates It 'Overvalued' With Sell Call
Goldman Sachs expressed concerns over the limited visibility of the company's medium- and long-term growth prospects.
Indus Towers Ltd. has been downgraded to "sell" rating from "neutral" by Goldman Sachs. The brokerage cited a discrepancy between the company's fundamentals and its current valuation, suggesting that the recent rerating of Indus Towers has been excessive. The stock fell over 4% in morning trade.
The brokerage, however, raised the target price on the stock to Rs 350 apiece from Rs 220 apiece, implying a downside of 20.98% from the previous close.
Goldman Sachs expressed concerns over the limited visibility of the company's medium- and long-term growth prospects. The firm indicated that it would reconsider its stance only if Vodafone Idea, a major client of Indus Towers, successfully addresses and improves its balance sheet.
The current share price suggests an expected Ebitda growth of 8–10% annually until the financial year 2030, but Goldman Sachs considers this projection overly optimistic given the prevailing market conditions and competitive environment.
The company’s future growth prospects appear uncertain amid shifting market dynamics. Additionally, Indus Towers’ valuation multiples are notably higher compared to its peers, such as Bharti Airtel Ltd. and Reliance Jio, raising questions about its relative attractiveness.
The report also highlights ongoing negative catalysts, including Vodafone Idea’s market share erosion and a reduction in Bharti Airtel’s rollout activities, which could adversely affect Indus Towers’ revenue and operational performance. While there may be justification for a higher multiple relative to Indus Towers’ recent history, Goldman Sachs views the recent rerating as overdone.
On Thursday, CLSA iterated its 'outperform' rating on the stock and anticipated that the company will gain from the expanding tower networks of major telecom operators like Bharti Airtel and Vodafone Idea.
The brokerage projected that the company’s Ebitda growth will be twice as high as that of its competitors. Additionally, the company is expected to benefit from a reduction in capital expenditure over time.
.png?auto=format%2Ccompress)
Shares of Indus Towers rose as much as 0.02% to Rs 443.20 apiece on Friday only to fall 4.75% and trade at Rs 422 apiece as of 10:18 a.m. This compares to a 0.09% advance in the NSE Nifty 50 Index.
The stock has risen 128.05% in the last 12 months. Total traded volume so far in the day stood at 0.28 times its 30-day average. The relative strength index was at 46.
Out of 22 analysts tracking the company, 10 maintain a 'buy' rating, five recommend a 'hold,' and seven suggest a 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an downside of 7%.
