Airtel Africa: Price Target Slashed as CardinalStone Predicts Profit
Nigeria’s top investment banking firm, CardinalStone Limited, has slashed Airtel Africa’s 12-month price target amidst expectation that the telecom company will return to profitability in the financial year 2024/2025.
The telecommunications company’s earnings came under intense pressure as inflation and currency devaluation in its key African market damaged performance. Airtel closed flat at N2,200 per share on the Nigerian Exchange due to thin trading activities amidst a share buyback from the London Stock Exchange.
Its market value settled at N8.267 trillion, making Airtel the second most valuable on the Nigerian Exchange, trailing Dangote Cement’s N9.065 trillion market valuation.
CardinalStone analysts said Airtel Africa 12-month target price was revised downward to N3,119.82 from N3,223.82 previously estimated.
This translates to 41.8% upside potential in the telecom stock, according to CardinalStone update. The investment firm said a major contributor to the upside is the higher conversion rate from USD to Naira.
“We maintain a BUY recommendation on the counter as AIRTELAFRI trades at an EV/EBITDA of 4.2x, a discount to its peer average of 5.3x”.
In the first quarter of 2025 earnings released, Airtel Africa’s revenue declined by 16.1% year on year to $1.16 billion, primarily due to significant currency pressures in its single largest market, Nigeria.
CardinalStone said the subsidiary saw a 51.5% year on year drop in topline to $256 million. In contrast, despite currency challenges in its Francophone and East African regions, revenue in those areas grew by 6.6% and 4.5%, respectively, bringing their combined income to $899.00 million.
“In our FY’24/25 estimate, we revised revenue growth downwards to 0.9% YoY from 12.8% YoY, reflecting higher-than-expected currency pressures in the Nigerian subsidiary”.
Analysts said the adverse currency movement is expected to mask the benefits of improved subscriber growth across the business and the improving mobile money traction in East and Francophone Africa.
In an effort to mitigate the impact of adverse currency movements on its foreign currency (FCY) liabilities, CardinalStone said Airtel Africa has taken proactive steps to eliminate foreign currency debt at the HoldCo level and reduce foreign currency debt at the OpCo level by 2.3% to $299.00 million, while increasing localized borrowings by 18.8% to $1.81 billion as of Q1’24/25.
In line with this strategy, analysts at CardinalStone said they have adjusted the firm’s debt mix to favour a slightly higher share of local currency (LCY) debt. As a result, analysts anticipate a 3.3% increase in total borrowings to $2.46 billion in FY’24/25.
The investment firm said the shift towards LCY debt, combined with elevated domestic interest rate, is likely to drive finance costs to $530.20 million from $482.00 million in the prior year.
Given Airtel Africa reduced FCY exposure, analysts forecasted a lower FX loss of $528.78 million for FY’24/25 as against $1.26 billion loss reported in FY’23/24.
Analysts now expect the company’s profit after tax in FY’24/25 to print at $311.93 million from a net loss of $89.00 million last year #Airtel Africa: Price Target Slashed as CardinalStone Predicts Profit Ecobank Advises Businesses to take advantage of its Single Market Trade Hub
