Vi shares rise despite pulling factors; details on Vodafone Group's earnings, dividend, outlook here
Vodafone Idea share price climbed on Tuesday despite a slowdown in co-parent UK-based Vodafone Group's FY23 results. It would be the strategic plan for the next four years of the British Group that has made investors optimistic about Vi shares.
PremiumTelecom major, Vodafone Idea's stock price rallied on Tuesday despite the UK-based Vodafone Group witnessing a slow down in FY23 performance. Although, the said financial year earnings were in line with expectations. The stock gains traction due to Vodafone Group's key strategic plan based on customers, simplicity, and growth. The Group's new chief executive plans to change Vodafone to simplify its organisation, cut on complexity, and gain competitiveness.
At the time of writing, Vodafone Idea aka Vi's share price traded at ₹7.21 apiece up by 1.7% on BSE. The stock has rallied by at least 2.4% with an intraday high of ₹7.26 apiece so far in the trading session. The stock is on the move to finish a second consecutive day winning streak.
The stock opened unchanged at ₹7.09 apiece from its previous closing and even touched an intraday low of ₹7.02 apiece. But in the mid-trading hours, the stock has gained significant momentum.
Vi shares have risen by at least 18.3% in a month. However, year-to-date performance is a downside of nearly 10.25% on BSE.
Read here: Vodafone to cut 11,000 jobs over 3 years; here's why
Vodafone Group's FY23 performance:
The Group's total revenue increased by 0.3% to €45.7 billion (FY22: €45.6 billion) driven by growth in Africa and higher equipment sales, offset by lower European service revenue and adverse exchange rate movements.
While adjusted EBITDAaL declined by 1.3% to €14.7 billion (FY22: €15.2 billion), with revenue growth offset by higher energy costs and commercial underperformance in Germany. The adjusted EBITDAal margin was 1.4 percentage points lower year-on-year at 32.1%.
Further, operating profit climbed to €14.3 billion and the Group made a profit for the period of €12.3 billion (FY22: €2.8 billion), largely reflecting a gain on the disposal of Vantage Towers.
Also, Vodafone saw a significant reduction in net debt to €33.4 billion, and proforma net debt to adjusted EBITDAaL improved to 2.5x.
Additionally, the Group's total dividends per share are 9.0 eurocents, including a final dividend per share of 4.5 eurocents for the fiscal.
Read here: Dividend stock hits 52-week high before Q4 results today. Do you own?
The need for change in Vodafone Group:
Vodafone needs to overcome some clear challenges. The chief said, "We are more complex than we need to be, which limits our local commercial agility."
According to the Della Valle, the European telecommunication sector has amongst the lowest ROCE in Europe, alongside the highest capital investment demands. This has resulted in ROCE being below WACC for over a decade, impacting Total Shareholder Returns.
More importantly, he said, "The comparative performance of Vodafone has worsened over time, which is connected to the experience of our customers."
Also, Vodafone's market position and performance vary by geography and segment. The chief executive added, "Where we have the right combination of strong local execution and a rational market structure, we can grow and drive returns. There are also material differences between our Consumer and Business segments, with Business growing in nearly all European markets."
Thereby, the Group's Chief Executive said, "My priorities are customers, simplicity, and growth. We will simplify our organisation, cutting out complexity to regain our competitiveness. We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business."
Read here: Nifty Midcap 100 index hits record high: What is driving the rally in these stocks?
Early stages strategies of Vodafone Group:
- Customers: Significant investment reallocated in FY24 towards customer experience and brand
- Simplicity: 11,000 role reductions planned over three years, with both HQ and local markets simplification
- Growth: Germany turnaround plan, continued pricing action, and strategic review in Spain
Vi Q4FY23 expectations:
Vodafone Idea's Q4FY23 earnings is expected to be under pressure.
ICICI Direct in its preview note said, "We build in monthly ARPU growth of ~1% QoQ at ₹136. We expect churn for Vodafone Idea to remain elevated, with ~4 million customer exits likely in Q4. We expect overall revenues to be down 1% QoQ at ₹10,519 crore. EBITDA at ₹4072 crore is expected to be down 2.6% QoQ owing to negative operating leverage. Reported margins are expected at 38.7%, down 70 bps QoQ. The company is expected to post a net loss of ₹7960 crore."
The company will announce its March 2023 quarter earnings soon.
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