Vodafone Idea may be multibagger with target of Rs. 10

[Sunil Lalwani]

Vodafone Idea appears to be in the grip of Bulls.

Yesterday (Monday), the stock was up 8.33 per cent.

There was huge delivery based trade of 775507976 shares.

The stock opened at Rs 4.25 and touched an intraday high and low of Rs 4.8 and Rs 4.2 , respectively, in the session so far. Shares of the company quoted a 52-week high of Rs 15.0 and a 52-week low of Rs 2.4 .



Even the OI (Options Interest) is looking very bullish.

As regards the fundamentals, the Market cap of Vodafone Idea is Rs 13103.34 crore.

In the quarter ended 31-Dec-2019, the company reported consolidated net sales of Rs 11089.4 crore, which was up 2.26 per cent from previous quarter's Rs 10844.0 crore.

The net profit after tax for the latest quarter stood at Rs -6438.8 crore, up 28.66 per cent from the corresponding quarter last year .

There is a lot of institutional holding in the stock.

As of 31-Mar-2020 , DIIs held 10.48 per cent stake in the company, while foreign institutional investors held 8.82 per cent and the promoters 18.48 per cent.

Vodafone Idea is also cheap in terms of valuations. The stock is trading at a P/E multiple of only -0.2 and a price-to-book ratio of 0.07 .

[siddharth]

Excellent pick. Stock is up 3% today. Looking very strong.

According to CNBC, Vodafone Group hints it may have to invest up to Rs 8,400 crore in Vodafone Idea.

If this happens, the stock will easily jump to Rs. 10.

[RKD]

Ambit has recommended a buy of Vodafone Idea with a target price of Rs. 19, which is a gain of 304%.

This clears means that Vodafone Idea has a good change of giving multibagger returns.

Research report of Ambit on Vodafone reads as follows:

"A networked future

Massive 4G investment, 40%+ of sales over FY17-20 vs normalized 101S%, helped Telcos enable WFH, home broadband and streaming
consumption at continental scale. Re-emergence 01 segmentation and enterprise spends will drive ARPU growth of 16% CAGR over FY20-2SE. Telecom spends will increase 10 1.37% of GDP in FY25E, and yet be lower than 2% global telco/GOP. Facebook's strategic investment indicates telecom is no longer a zero-sum game; each player will build on strengths and pursue unique monetization opportunities . Belief in a credible reinvestment opportunity increases our optimism. We turn BUYers on Airtel, upgrading market share and ARPU assumptions, but temper expectations 01 BHIN. Steady price hikes will attract investors; lelecom Is currently under-indexed (- 7% of NIFTY/MFSCI India vs 10%+ globally) given historic market challenges."

[Sunil Lalwani]

Vodafone Idea plans to gain market share in its strong circles with focused capex spend, as it expects its share in the net adds to go up. Management refrained from giving a timeline for sector revival.

In the analyst meet, Vodafone Idea management reiterated its network integration is on track with full impact of synergy benefits expected in 2 years (by Q1FY21).

It has maintained its capex guidance (`270 bn in 2 years) as it expects cash position to improve from equity infusion, asset monetisation, ARPU improvement and synergy benefits. It sees market share stabilising at 30% (for 3+1 player market) as it expects to gain market share in its traditionally strong circles. Also, it expects ARPU to improve as 4G revenue share improves gradually.

Funding concerns to be alleviated by (i) `250 bn capital raise; (ii) sale of fiber network; and (iii) tower stake sale. Easing of competitive intensity will have stronger impact on the earnings of Vodafone Idea as (i) ARPU erosion subsides by FY20 and (ii) synergy benefits help improve margin. Maintain ‘Buy’ with a TP of `37.

Company plans to gain market share in its strong circles with focused capex spend, as it expects its share in the net adds to go up. Management refrained from giving a timeline for sector revival.

However, it sees opportunity for growth by pushing the unlimited bundles. It expects market share to stabilise around 30% as it sees market size as optimal with 3 players. Global average is of 3 player market with Ebitda margin of 39%. Management also highlighted there is slow down in Jio phone landing in Idea network.

We expect competitive intensity to reach steady state, easing pressure on ARPU by FY20. Vodafone Idea to benefit from operating leverage as ARPU improves gradually from FY20.

The company has signed new credit agreement with vendors that could provide `60-bn benefit in the near term. Synergy to improve margin after the merger led by rationalisation of overlapping sites.

Company tried to allay funding concerns as it had `89 bn of cash at the end of December 2018, and expects (i) `250 bn from equity infusion; and (ii) `50 bn from Indus monetisation. Additional synergy benefit of `200 bn is also expected in 2 years.

[Sunil Lalwani]

In telecom, there is a clear signal that the regulator, the government as well as players are taking the right steps to ensure long-term viability of the sector, says Sameer Narayan, Market Expert.

If I am looking for a multibagger opportunity, Vodafone Idea probably looks better because there in case the rate of change happens, you could probably have a lot of value accretion. At Rs 16,000 crore of market cap, the problem is the net debt of about Rs 1 lakh crore and in case you talk of increasing the tariffs, the EBITDA will probably grow by almost 70%. The rate of change is not perhaps getting priced and the stock has only doubled. If the EBITDA grows 2X, the stock should technically go 4-5X.

[RKD]

Important Supreme Court judgement is there tomorrow on the Vodafone Idea AGR controversy. Hope the SC gives relief and the stock flies again

[imthiyasi]

Vodafone 13% down after SC hearing..... Can it recover.... Please your suggestions and advice.... Thanks

[RKD]

I think it is clear that Vodafone Idea as a company will continue. The only wrangle is about the time period that should be given for payment of the AGR dues and how to secure it i.e. by way of a bank gaurantee etc.

Once the issue is resolved after the Supreme Court's decision next Thursday, we can expect the stock to recover positively.

Today, the risk:reward favors staying invested in Vodafone Idea.

[imthiyasi]

Now for the last 2 weeks VI is totally in Red..,.. please can I hold or book lose in this

[RKD]

Nomura has issued a 'Reduce' reommendation on Vodafone Idea for a target price of Rs. 8. The logic is that the 1Q results were below expectations due to higher opex. This makes fund-raising critical for VI's survival.

Nomura has also stated that Voda Idea's Revenue/ARPU has inched up on tariff hike flow through. The paying subscribers have declined. This trend is continuing though the quantum is stable. Unfortunately, the VLR subscriber base has declined sharply.

It is emphasised by Nomura that Vodafone Idea's usage metrics are continuing to lag peers like Jio and Airtel and this is a cause for concern. So, sell Vodafone Idea for the target price of Rs 8.