Another outstanding year ahead?! – Model update and Q1 preview

Due to the transfer of coverage, we revisited our estimates for MTELEKOM. We reiterate our Buy recommendation with a 12-m ex-div TP of HUF 1,240, implying a 37% upside potential. MTELEKOM has reported a strong set of results for the full year of 2023 and gave a very impressive guidance for 2024. We expect revenues to increase 9.9% YoY, EBITDAaL will be up by 22.9% and the adj. net profit will arrive at HUF 131bn, resulting in 65.7% increase YoY.

On the 16^th of April, MTELEKOM approved a DPS of HUF 44.7 and authorized the proposed SBB program of up to HUF 24bn. The current shareholder remuneration policy will end in 2024 and will be renewed in 2025 February, though we do not expect material changes in the payout ratio going forward.

Driven by the inflation-based fee adjustment, the moderation of costs due to the removal of utility tax from 2024 and the expected phase out of extra profit tax from 2025, we see MTELEKOM to have strong years ahead. While the inflation-driven incremental revenue growth will have come to an end by 2026, the increasing demand for data and internet accompanied by solid market share should result in a sustainable profit level after 2025.

We forecast an adjusted net profit of HUF 131/173/183bn or an EPS of HUF 145/191/203 for ‘24/’25/’26, respectively. Please note that we have already incorporated the approved HUF 24bn share buyback for 2024, however we did not assume any more buyback for the upcoming years due to the expiration of the current shareholder remuneration policy. Although, we maintain our view, that the shareholder remuneration remains in focus, hence we assume a constant payout ratio of 70%, resulting in a DPS of HUF 101/134/142 for ‘24/’25/’26, respectively.