Vodafone Idea Sell Rating :If Vodafone Idea stock is in your portfolio, then it is time to be alert. Brokerage house Goldman Sachs has given a target price of Rs 2.5 for the stock and advised selling. The current price of the stock is Rs 13.35, in this respect it has fallen by 81 percent. The brokerage believes that despite some positive factors, the company’s market share may continue to decline. Which will have a negative impact on the stock. Vodafone Idea stock has already fallen by 18 percent in 1 month.
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Fear of loss of market share
Brokerage house Goldman Sachs says that the recent capital growth of telecom company Vodafone Idea is positive, but it is not enough to stop the decline in its market share. The brokerage has predicted a loss of 3 per cent market share for Vodafone Idea in the next three to four years. For this, the direct relationship between capex and revenue market share has been cited. The company’s own estimate is that its capex will be 50 per cent compared to competing companies.
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Stock may fall to Rs 2.5
The brokerage firm expects Vodafone Idea’s net debt-to-EBITDA to remain elevated till March 2025. It also believes that the book will remain under pressure even after the potential conversion of near-term dues into equity by the government. Moreover, Vodafone Idea is trading at 24x FY26E EV/EBITDA, which is a sharp premium to the 12x of Bharti Airtel’s India business. Despite its weak growth and return profile, the brokerage estimates a mid-single digit CROCI for Vodafone Idea during its forecast period. It is 17-18 per cent for Bharti Airtel/Reliance Jio. The brokerage has a sell recommendation on Vodafone Idea with a target price of Rs 2.5.
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There is also the matter of AGR/spectrum related payment
Goldman Sachs said that Vodafone Idea also faces the issue of large Adjusted Gross Revenue (AGR)/spectrum related payments starting from FY 2025-26. According to the brokerage, the government has the option to convert some of the dues into equity, but we estimate that the average earnings per user (ARPU) should grow by Rs 200-270 (120-150 per cent in different scenarios).
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What will happen in a positive case?
The brokerage says that in a blue-sky scenario, where we estimate AGR dues to be reduced by 65 per cent, continued tariff hikes and no government repayment in the near term (upside risk), we see a target price of Rs 19 per share for Vodafone Idea, implying an upside of 26 per cent.
(Disclaimer: The views or advice on the stock are given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert advice before investing.)
