Vodafone Idea shares: Should you buy, sell or hold as Q3 loss widens?

“Vodafone Idea (VI) delivered soft Q3FY23 results with modest APRU gains (INR135 versus INR131 in Q2FY23), and persistent subscriber loss (6mn) and lower MOU. Revenue and EBITDA were both flat QoQ. We remain watchful of the capital-raise and ARPU trajectory. VI also needs to ensure it does not fall too far behind its peers in the 5G rollout. We have incorporated the equity conversion by GoI into our estimates. We do not include AGR dues of ₹699 bn in our price target calculation,” said Nuvama Research while maintaining its ‘REDUCE/SU’ tag with a target price of ₹7.

“It continues to lose subscribers(mainly in 2G segment) and that adversely impacts revenue growth. The addition of 4G subscribers remains muted. It needs capital infusion for augmenting the capital expenditure to catch up with peers in terms of 4G coverage/capacity. It has still not announced any timeline with regard to 5G implementation,” said Yes Securities in a note.

The brokerage house expects EBITDA Margin to improve in near term led by lower SUC charges and some savings on rental after recent renegotiation with Indus Towers. “We estimate revenue CAGR of 12.3% over FY22‐24E with average EBITDA margin of 43.6%. We maintain our REDUCE rating on the stock with target price of ₹7.5/share,” Yes Securities added.

“The much-awaited capital raise remains critical to providing immediate liquidity for network expansion. The significant amount of cash required to service debt leaves limited upside opportunities for equity holders, despite the high operating leverage opportunity from any source of ARPU increase. The current low EBITDA will make it challenging to service debt without an external fund infusion. We reiterate our Neutral rating with a target price of ₹8,” said another brokerage Motilal Oswal.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.