On Friday, Vodafone Idea’s share price rose more than 4% after UBS, a global brokerage, upgraded its rating from ‘Neutral’ to ‘Buy’. UBS also increased the target price to ₹18 from the previous ₹13.10. The share price started at ₹14.23 and reached a high of ₹14.75 on the BSE.
Rajesh Bhosale, a Technical Analyst at Angel One, noted that the stock opened higher and continued to see strong buying in early trading. If this trend continues, the price might rise to around ₹15.8. However, if it falls below ₹14.10, it could drop further.
UBS predicts a significant 70-80% rally for Vodafone Idea in the near future. They believe a decrease in AGR dues by the Supreme Court or equity conversion, along with government support, could help, especially as the government wants to maintain three private telecom companies.
UBS set the ₹18 target price based on a 50% chance of AGR dues being waived. While other relief measures like spectrum dues cancellation are possible, UBS did not include these in their base target price.
UBS pointed out that Vodafone Idea is highly affected by any relief measures, yet its stock is trading at similar valuations to Airtel and Jio. They believe the potential reward outweighs the risks, leading to the ‘Buy’ upgrade.
UBS also mentioned that the stock market expects a 15-20% increase in mobile prices in the next 12-24 months, as Vodafone Idea’s public offer concludes and companies like Bharti Airtel and Reliance focus on profitability over market share. UBS maintained its ‘Neutral’ ratings on Bharti Airtel and Indus Towers.
Vodafone Idea’s annual payments to the government will exceed $5 billion from FY26, including $2 billion for AGR and $3 billion for spectrum. UBS believes that up to 50-75% of AGR dues could be waived. If this happens, their valuation could increase to ₹24 per share, compared to ₹12 without any waivers.
UBS also raised the target price for Indus Towers from ₹220 to ₹355, factoring in increased demand from a better-funded Vodafone Idea and repayment of historical dues. They estimate the tenancy ratio for Indus Towers will increase, leading to the higher valuation, but still maintain a ‘Neutral’ rating.
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