Pick of the week stock : Indus Towers Ltd

Buy Indus Towers in the in the price range of Rs 342-350. Add, on dips to Rs 309-315 price band. Base case fair value : Rs 380. Bull case  Fair value : Rs 410.  Time Horizon : 2-3 quarters.

 Our Take:

Indus Towers Limited is in the business of providing tower and related passive infrastructure to various telecom service providers on a non-discriminatory basis under long-term service contracts. The company is committed to building robust and sustainable infrastructure for seamless connectivity. Dedicated to supporting the rapid deployment of cutting-edge technology standards for cellular networks. The company has entered into long-term arrangements, i.e., Master Service Agreements (“MSA”) with telecom operators, including its major customers, i.e., Bharti Airtel and Bharti Hexacom, for rendering passive infrastructure services, including project management or provisioning, establishing, installing, operating and maintaining.

Indus plans to expand its telecom infrastructure by adding over 20,000 new tenancies in the next year, maintaining its dominant market share. Indus Towers has over 2,51,773 towers and 4,11,212 co-locations and a nationwide presence covering all 22 telecom circles. It has the widest coverage in India. The company expects a robust tower rollout for at least the next 4-6 quarters, based on strong order book visibility.  The company expects both towers and tenancies to grow, and these towers will continue to have the option to accommodate a second tenant.

The company will begin its business operations in African countries in partnership with its existing partner, Bharti Airtel, which has a strong presence in the region and holds the third-largest market share. Combined with the growth potential in emerging opportunities in Africa, its robust financial position, and anchor customer relationship with Bharti Airtel, the company is well-positioned for an entry into international markets.

Valuation & Recommendation:

The future outlook for the tower infrastructure sector is positive and robust, driven by continued global 5G expansion, increasing data consumption, and government initiatives aimed at digital transformation. Key trends include increased network densification with more towers and small cells, the integration of sustainable energy solutions such as solar power, the strategic deployment of AI for predictive maintenance, and the expansion of services beyond traditional telecom to include fibre, data centres, and IoT infrastructure.

The company is proactively addressing cost and margin pressures through operational efficiency, renewables, and technology adoption. While near-term cash distributions are on hold, the company maintains a strong balance sheet and is positioned for further industry consolidation. Management remains optimistic about growth prospects, supported by structural industry tailwinds such as 5G adoption and rising data consumption, while also being cognizant of operational and customer-related risks. Agility, innovation, and a commitment to sustainability will be key drivers of success, enabling tower companies to meet the growing demands for global connectivity.

Indus Towers’ planned Africa expansion appears strategically sound, leveraging the strong growth potential in under-penetrated telecom markets, which contrasts with India’s mature landscape. Attractive tower economics, aided by high tenancy levels and Airtel Africa’s anchor presence, support profitability, while partial dollar-linked rentals mitigate currency risks. Management is likely to pursue a calibrated investment strategy, emphasising disciplined capital allocation and market evaluation in the initial years before scaling operations across the continent.

Investors can buy in the Rs 342-350 band and add on dips in the Rs 309-315 band (10.25x Sept’27E EPS & 5.1x Sept’27 EV/EBITDA). We believe the base case fair value of the stock is Rs 380 (12.5x Sept’27E EPS & 6.1x Sept’27 EV/EBITDA) and the bull case fair value of the stock is Rs 410 (13.5x Sept’27E EPS & 6.5x Sept’27 EV/EBITDA) over the next 2-3 quarters. At the LTP of Rs 346.3, the stock is trading at 11.4x Sept’27E EPS & 5.6x Sept’27 EV/EBITDA.

 Disclaimer : This recommendation is general in nature. Do not make any investment solely on the basis of this recommendation. The recommendation does not factor in your unique risk tolerance and investment objectives. It is more for informational purpose only.

Source: HDFC Securities Prime Research

To see full report and full recommendation, click on: https://static.hdfcsec.com/research/reports/019993712f9f7580b94319ac588a9845.pdf