BofA upgrades Vodafone Idea rating to 'Neutral' on tariff hike leverage, lifts price target to ₹14.5

livemint.com:

Vodafone Idea from 'underperform' to ‘neutral’ as the brokerage finds VIL offers the highest leverage for tariff hike (5% ARPU increase leads to 12% EPS increase). Moreover, the brokerage pointed out that the recent fundraise by the company is expected to enhance its 4G network coverage, which could mitigate market share declines and enhance competitiveness. Also Read: Prabhudas Lilladher advises long-term SIPs in Aditya Birla Group stocks However, despite these positive aspects, the brokerage refrains from recommending VIL as a buy.

This decision is based on the need for further clarity regarding the improvement in the funding position post-FY26, especially as the spectrum moratorium concludes. BofA has adjusted its EPS estimates for FY 25/26 to ₹(2.7) and (1.5), respectively, factoring in the recent capital raise. The brokerage has also revised its price target upward to ₹14.5 per share from the previous target of ₹9.4 per share.

BofA underscores a growing optimism toward the momentum in the telecom sector. The brokerage now anticipates a potentially higher magnitude of tariff hikes, ranging between 20% and 25%, compared to its earlier projections of 10% to 15%. Also Read: Vodafone Idea, Nykaa, SAIL may enter MSCI Global Standard index in August rejig This upward revision is attributed to improving cash flows, which telecom companies are expected to channel into expanding high-margin segments such as fibre broadband, enterprise services, and data centres.