Shares of Vodafone Idea and Indus Towers experienced a sharp decline in early trade on September 6, following a report by Goldman Sachs that raised concerns about their future performance in the telecom sector. Vodafone Idea’s stock plunged over 6%, while Indus Towers saw a 2% drop as Goldman expressed doubts over the companies’ growth prospects.
Vodafone Idea’s Struggles Continue
Goldman Sachs maintained a bleak outlook for Vodafone Idea, predicting the company could lose an additional 300 basis points in market share over the next 3-4 years. The firm upheld its ‘Sell’ rating for Vodafone Idea but slightly increased the stock’s target price from Rs 2.2 to Rs 2.5. Despite the minor adjustment, this new target still represents an 83% downside from the current price. According to the report, Vodafone Idea faces significant challenges in reaching free cash flow break-even and regaining lost market share.
Even in an optimistic scenario—where the company’s adjusted gross revenue (AGR) dues are reduced by 65%, tariffs increase, and no immediate government repayments are required—Goldman Sachs projected a best-case share value of only Rs 19 for Vodafone Idea.
Indus Towers Downgraded
Indus Towers, a key partner of Vodafone Idea, saw its shares fall over 2% as Goldman Sachs downgraded the stock to ‘Sell’ from ‘Neutral’. While the target price was raised to Rs 350 from Rs 220, the firm noted that the current valuation of Indus Towers is not aligned with its fundamentals. Goldman highlighted limited visibility on medium- and long-term growth prospects for the company and cautioned that the stock’s recent rally, up over 75% in the past six months, was overdone.
Indus Towers’ stock is currently trading at Rs 443, which is 26% higher than Goldman’s revised target price. The firm hinted that it would only take a more optimistic view if Vodafone Idea, one of its major clients, successfully stabilizes its financial position.
Bharti Airtel Shines Amid Sector Concerns
Contrary to its stance on Vodafone Idea and Indus Towers, Goldman Sachs issued a bullish outlook on Bharti Airtel, significantly raising its target price to Rs 1,700 from Rs 900, indicating a potential 10% upside from its current market price. The brokerage maintained its ‘Buy’ rating for Bharti Airtel, citing the company’s strong growth trajectory, potential tariff hikes, and a favorable free cash flow (FCF) and returns profile.
Goldman expects Bharti Airtel’s India revenue and EBITDA to grow at a compound annual growth rate (CAGR) of 16% and 21%, respectively, from FY24 to FY27. Additionally, the firm predicts that Bharti Airtel could reduce its net debt to near zero by FY28, thanks to its improving balance sheet.
