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MOSL: INDUS TOWERS (Neutral): Steady tenancy adds drive in-line EBITDA growth; outlook unclear

INDUS TOWERS: Steady tenancy adds drive in-line EBITDA growth; outlook unclear

(INDUSTOW IN, Mkt Cap USD8b, CMP INR222, TP INR250, 13% Upside, Neutral)

 

• Revenue/EBITDA grew 4.7%/3%, led by steady 3k tenancy adds and lower opex driving 4.1% rental EBITDA growth. Adjusted for one-time lower operating expenses, rental EBITDA was up 2.5% QoQ.
• Net tenancy additions at 3k have been stable and improved in the last year, with significantly lower exits reported. However, lower penalty receipts from VIL in FY23E should taper growth. Subsequently, we estimate a consolidated FY21-23E revenue/EBITDA CAGR of 5.1%/6.8%. Furthermore, given the weak long-term outlook, we maintain Neutral.

 

EBITDA up 3% QoQ (in-line)

• Proforma consol revenue grew 4.7% QoQ (in-line) to INR67.9b; rental revenue grew 1.7% sequentially (in-line) to INR42b. New tenancy adds came in at a steady 3k, with rental rates up 1% to INR42,730/tenant.
• Proforma consol EBITDA increased 3% QoQ to INR35.2b (in-line), aided by 4% revenue growth.
• Rental EBITDA grew 4.1% QoQ to INR35.7b on improved revenue performance and decline in repairs (-11% QoQ) and other expenditure (-32.3% QoQ). Consequently, rental EBITDA margins improved ~200bps to 84.9% in 1QFY22. Energy EBITDA loss widened to INR606m v/s INR238m in 4QFY21. Adjusted for a 50% reduction in operating expenses, which may be reversed, rental EBITDA was up by 2.5% QoQ.