The brokerage expects the rally to continue as it initiated coverage on the stock with a 'buy' rating and set a target price of ₹20 apiece. The stock was last seen trading around these levels in January 2019 and indicates 29% higher from Wednesday's closing price.
In its bull-case scenario, Jefferies expects the stock to reach ₹36, indicating an upside of 132%, assuming cumulative tariff hikes of 30% during FY27–29E.
However, in its bear-case scenario, the brokerage expects the stock to fall to ₹9, assuming no tariff hikes during FY27–29E.
The brokerage also expects strong operating leverage to drive a significant improvement in profitability. Jefferies forecasts an 840-basis-point expansion in VIL's cash EBITDA margin to 29% over FY26–29, resulting in a 25% CAGR in cash EBITDA over FY26–31. It expects incremental EBITDA margins to rise above 60% from FY30 as network rollouts normalise.
Jefferies expects VIL's operating cash flows to improve steadily but sees a temporary cash-flow mismatch as annual cash outflows rise to more than ₹400 billion during FY29–34. The brokerage estimates that the planned ₹250 billion debt raise should help fund the company through FY27–29, but VIL would require a further ₹160 billion equity infusion in FY30.