Inwit Earnings: Strong Start to 2023 With Double-Digit Growth in Revenue and Profits

Narrow-moat Inwit INW continued its healthy pace of organic growth during first-quarter 2023, with revenue growing 12.8% thanks to new tenants and consumer price index-linked escalators, which resulted in EBITDA after leases growth of 18.9%, a 71% margin, and 360-basis-point expansion year over year. The tenancy ratio is now 2.19 times (2.05 one year ago), the highest among European tower companies. Italy is one of Europe’s healthiest tower markets due to high competition among mobile operators, which keep deploying radio equipment across the country. We maintain our EUR 12.60 fair value estimate, which we increased in March after management raised its guidance.

We remind investors that Inwit is a high-quality name, with inflation protection, healthy organic growth ahead, and strong margins, and it is well positioned to reach its 2023 and 2026 guidance. It is also a shareholder-friendly company, as it keeps growing its dividends at a good pace. In March, Inwit increased its expected 2024 dividend by almost 40% to EUR 0.48 per share, which at the May 10 price of EUR 12 per share would represent a 4% yield. From then onwards we believe Inwit can comfortably grow its dividend at mid- to high single digits. Net debt/EBITDA (excluding leases) is 4.7 times, which we consider manageable for Inwit due to its strong cash flow visibility and long-term contracts.

In March, Reuters reported that Ardian (which owns one third of Inwit) may be interested in taking Inwit private. Although we haven’t seen any new media reports we wouldn’t be surprised if Ardian does attempt a full takeover as many private equity firms have bought significant stakes in European tower companies in the last 24 months. Vodafone, which is indirectly Inwit’s largest shareholder, announced on May 8 the sale of a 5% stake in Vantage Towers to UniSuper, an Australian pension fund, so we wouldn’t be surprised if they’re also considering a partial or total divestiture of Inwit.