MTNN Plc Q1:2023 Earnings Note - Increased Topline Shores Earnings Position
Increased Topline Shores Earnings Position
Data Revenue drives increase in Topline
In its recently released Q1:2023 financials, MTN Nigeria Communications Plc (MTNN) posted improved topline numbers, sustaining its growth trajectory following the record-breaking 2022FY performance. Total revenue grew by 20.63% YoY to NGN568.14bn, supported by faster growth in data revenue (+40% YoY to NGN227.6bn) and voice revenue (+8% YoY to NGN234.50bn). Macroeconomic headwinds characterized by inflationary pressure and stunted GDP growth continue to put pressure on operating costs, evidenced by the surge in direct network operating costs (+27% to NGN136.65bn). Notwithstanding, MTNN recorded an improved bottom-line as it grew its Profit before Tax by 8% YoY to NGN155.78bn.
Healthy Profit Margins – Increased Topline Shores Earnings Position
Net Finance Costs for MTNN surged higher by 42% YoY to NGN50.84bn. This was primarily due to higher interest expense on borrowings (+30% to NGN19.13bn) and leases (+7% to NGN24.88bn). During the quarter, a significant FX loss was also recorded at NGN11.82bn, up 5.6x from NGN1.79bn in Q1:2022. However, Profit before Tax moderately increased by 8% YoY to NGN155.78bn (vs. +39% in Q1:2022). Consequently, PBT margins remained appealing at 27% (vs. 30% in Q1:2022).
After considering the factors outlined, we maintain our bullish stance on MTN Nigeria Communications Plc. and retain "STRONG BUY" recommendation, with a target price of NGN327.37 (43.02% upside potential as of May 9th, 2023). Our positive outlook is predicated on the upward trend in revenue growth in the second quarter of the year.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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