Magyar Telekom - Just A Hiccup, Buy Every Share Price Weakness And Sell Into The Auction

MTEL’s Q1 net profit took a nosedive as expected, but it came even lower than the consensus
because of higher than anticipated net financial expenses – consensus: HUF 12.4bn vs fact: HUF
10.5bn (-15%). Please note that adjusted net income (dividend pool) arrived to HUF 12.1 bn just
slightly below consensus (HUF 12.4bn). We recommend to buy every share price weakness that may
occur as the earnings will accelerate after Q1. Management kept every lines of guidance (EBITDA +5-
10% y-o-y) unchanged indicating that earnings will indeed be significantly higher for the rest of the
year.
 EBITDA came lower by HUF 5 bn or 9% because of high ‘22Q1 basis - no windfall tax (HUF7.2bn),
and one non-recurring gain (HUF 3.4).
 Key positives:
1. Strong subscriber growth momentum was maintained (Q1:+65k q-o-q vs.
Q4:+76k q-o-q)
2. Inflation indexation affected financials only for one month but ARPUs jumped
– see the red frame in the P&L table below
3. Revenue growth was 11.4% y-o-y above mgmt. FY guidance for revenues
(5-10% growth)
 Key negatives:
1. MTEL’s mobile RGU (post-paid) surprisingly decreased by 33k q-o-q. Could
be a result of state owned companies switching to 4iG as we do not see any
break in growth momentum in the fixed line segment?
 All in all, headline results optically does not look good as profit plunged by 43% y-o-y, however this
mainly due to the high ’22 basis, and will not be repeated. The underlying trends are encouraging
(RGU growth and robust ARPU) and we expect to see the full effect of the inflation indexation by Q2.