Vodafone Idea shares: 90% upside ahead? Buy telecom stock, says Nomura

Nomura India ahs retained its 'Buy' rating on Vodafone Idea with a target price of Rs 14 that suggests a potential 90 per cent upside over the stock's Friday closing price of Rs 7.34. Nomura is factoring in a decline in pace of subscribers loss in
FY26 and expects the telecom operator to return to a modest growth path in FY27, underpinned by investments for expanding 4G population coverage and 5G roll out.

While the foreign brokerage sees Ebitda for Vodafone Idea to compound at 14 per cent annually over FY24-27, it noted that its outlook for VIL remains hinged on VIL closing its debt raise soon, which is critically essential for the telecom company to be able to invest in networks and potentially return to a modest subscriber growth path.

The target price by Nomura India though is lower than Rs 15 target price it suggested earlier due to its trimming of earnings estimates and rollover to December 2026 earnings estimates.

Nomura India said the key takeaways from the post-results conference call with the management indicated that VIL has primarily lost its subscribers to BSNL due to tariff hikes announced in July 2024; albeit the management indicated that the trend has started reversing from August onwards.

The Vodafone Idea management expects the full impact of tariff hikes to be reflected over the next two quarters. VIL will start 5G rollout in key geographies by Q4FY25, the management suggested adding that VIL’s targets to increase 4G population coverage to 120 crore by September 2025E.

VIL added 42,000 4G sites and shut down 19,700 3G sites in Q2FY25. The capex was guided at Rs 8,000 crore for 2HFY25 and Rs 50,000-55,000 crore over the next three years.

"We cut our FY25F Ebitda estimate by 3 per cent and for FY26F/27F by 5 per cent/4 per cent on factoring lower subscribers; we factor in a 12 per cent ARPU for FY26-27F with ARPUs increasing from Rs 161 in FY25F to Rs 182 in FY26F and Rs 205 in FY27F," it said.