Telecom stock to buy now for an upside of 20%; Do you own it?

Published 16-01-2025, 01:52 pm
© Reuters.  Telecom stock to buy now for an upside of 20%; Do you own it?

The tower industry in India is poised for significant growth, driven by the increasing demand for telecom infrastructure, especially with the rollout of 5G technology. India’s telecom sector continues to expand, requiring more towers for improved network connectivity and coverage. The tower industry, which provides the necessary infrastructure for telecom companies, has become a key enabler in this transformation. Leading players in this sector include Indus Towers, Bharti Infratel (NS:INUS), and American Tower (NYSE:AMT) Corporation (ATC India).

Indus Towers, being one of the largest independent tower companies, stands to benefit from the growing demand for telecom infrastructure, particularly as the country transitions to 5G. The company’s strategic partnerships and large tower base position it well to capture substantial growth opportunities in the expanding telecom ecosystem.

Share Price

The shares of Indus Towers Ltd are currently trading at Rs. 356.65 up by 1.38% from its previous close of Rs. 351.8. The stock also touched an intraday high of Rs. 363 as of January 16, 2025. The stocks have given a return of 62.48% as compared to Nifty’s return of 5.77%.

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Recent Update

UBS Upgrades Indus Towers to ‘Buy’ with ₹425 Target (NYSE:TGT)

UBS has upgraded Indus Towers to a “Buy” rating with a target price of ₹425 implying an upside potential of Rs. 19% from the current price of 356, citing positive shifts in the telecom sector that could significantly benefit the company. This upgrade reflects UBS’s confidence in the growth potential of Indus Towers, particularly amid evolving market dynamics in India’s telecom infrastructure landscape.

Rationale Behind the Upgrade

UBS believes Indus Towers is well-positioned for future growth, primarily driven by the minimal incremental capital expenditure (capex) required for Vodafone Idea’s tower expansion. The company’s shift in growth drivers from Bharti Airtel’s tower rollouts to Vodafone (LON:VOD) Idea’s expansion presents a favorable scenario for Indus Towers. This transition offers stability, as minimal new capex reduces financial strain.

Potential for Meaningful Dividend Payouts

UBS highlights the potential for Indus Towers to deliver substantial dividends, supported by Vodafone Idea’s continued payments to clear past dues. This strengthens Indus Towers’ ability to generate robust cash flows, positioning it well to reward shareholders with healthy dividend payouts in the near future, and enhancing its investment appeal.

Future Outlook

Indus Tower has an extensive presence in all telecommunication circles and with strong growth potential as data consumption and data users/devices continue to increase. Additionally,

long-term contracts with leading wireless telecommunication service providers in India, provide visibility on the future revenues of the company. The estimated weighted average remaining life of service contracts, entered into with telecommunication service providers, as of March 31, 2024, is 6.34 Years.

Lastly, Indus Towers has started deploying lithium and VRLA together using cutting-edge HSBTS switches, which will lower the cost of diesel. Furthermore, a cutting-edge aluminum-air energy-generating solution for sites with high fuel use is assessed and scheduled for trial deployment. Besides this Indus Tower is also planning to expedite the installation of 5G towers across all its circles.

Written By: Dipangshu Kundu

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The post Telecom stock to buy now for an upside of 20%; Do you own it? appeared first on Trade Brains.

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