MTN Nigeria: Analysts Slash Price Expectation by 36%, Project Loss for 2024
Following heartbreaking earnings performance in the first quarter of 2024, equities analysts at CardinalStone Securities Limited have slashed target price of MTN Nigeria PLC by 36%.
The investment firm said in its equity report that the telecom has a hold recommendation and that the change to a 12-month target price of N240.28 per share from the previous N375.82 implies a 7.3% upside to the current price of N224.00.
According to details from equity report, CardinalStone said MTNN’s performance was constrained in financial year 2023 and Q1-2024, owing to a surge in costs and FX-induced drag on profitability. The telecom behemoth’s foreign exchange losses completely destroyed its 2023 earnings, and because of its exposure to foreign obligations related to tower leases, the pressure continued into the first quarter of 2024.
“In 2024, we expect MTNN to report a loss of N27.41 billion, materially lower than the N137.02 billion in the financial year 2023, due to a likely tamer currency pressure in 2024,” CardinalStone said in its update.
Analysts at the firm believe that MTNN is well-positioned to benefit from the upsides in Nigeria’s fast-growing telecommunications sector, given its market leadership position. The telecom giant controls 37.4% of the total market share in Nigeria, CardinalStone said in its equity report.
“We project MTNN’s 2024 revenue to grow by 20.4% year on year to N2.97 trillion, driven by 8.0% and 35.0% increases in voice and data, respectively,” the investment firm stated. Analysts added that gains in the latter, which is now the biggest contributor to the top line, reflect growing digital connectivity, improving data bundle offerings, and the expanding use of online services.
“Our financial year 2024 revenue projection will likely defy expected moderation in the total subscriber base, which stems from the regulatory directive that all SIM cards not linked with NIN be discontinued.
“To validate our prognosis, we note that while MTNN fully barred 8.60 million subscribers in Q1’24, the net effect of the barred lines only translated into a 2.00 million drop in subscriber base and a 0.2% decline in active data users, demonstrating MTNN’s resilience,” CardinalStone stated.
According to the equities report, management expects that the extension of the NIN-SIM linkage deadline to July should enable them to correct the exercise’s impact on the subscriber base, suggesting that the revenue impact of the discontinued lines may be negligible.
“We project earnings before interest tax depreciation and amortisation (EBITDA) and earnings before interest tax (EBIT) margins to moderate by 2.8ppts and 3.3ppts to 45.9% and 28.0%, respectively, reflecting the negative impact of the recently introduced VAT on tower leases and still elevated inflation”, analysts at CardinalStone said in the report.
For 2024, the firm estimates that MTNN’s FX losses will print at N652.8 billion, an improvement from the N740.43 billion recorded in FY’23, anchored on the expectation for tamer currency depreciation of 30.2% in 2024 vs 49.1% reported in 2023.
“Further reinforcing our view, we like that MTNN recently paid $183.6 billion on its outstanding letter of credit obligations, reducing its total foreign currency exposure to $379.50 million vs $563.11 million in 2023”. Overall, CardinalStone expects MTNN to report a loss after tax of N27.41 billion in 2024, a significant decline when compared with a loss of N137.02 billion in 2023.
Analysts said MTNN’s industry leadership has largely been supported by its deliberative drive to improve and optimise its network capacity.
This strategic drive informed the company’s roll-out of 9,589 4G sites and 1,945 5G sites, as well as the additional acquisition of 2600MHz spectrum in 2023, the equity report added. These investments took network coverage and quality to desirable levels, the report reads. Hence, management has indicated plans to reduce capital expenditure (excluding leases) for 2024 and aim for a capex intensity in the upper single digits. MTN Nigeria Posts N576bn Loss, Customer Declines in Q1
“We estimate that this reduced capex would buoy free cash flow from investing, with FFCF likely to improve by 49.2% to N942.25 billion in 2024”, analysts at CardinalStone. #MTN Nigeria: Analysts Slash Price Expectation by 36%, Project Loss for 2024 Geregu Power Stops ‘Rolling’ at 52 Week High
