Magyar Telekom-Strong operational momentum, beats on all lines

• MTEL posted very strong Q1 figures, all of the lines came above the consensus. EBITDA and Profit arrived at HUF 62 bn (+24% y-o-y) (vs. cons HUF 59bn) and HUF 18.5 bn (+107% y-o-y) (vs. cons HUF 14.8 bn) respectively. Excluding one-off gain (HUF 3.3bn) recognized on the sale of an IT subsidiary, profit would have arrived ta HUF 15.2bn (+68% y-o-y). The profit was also supported by financial gains in an extent of HUF 2.8bn, which is subtracted from adjusted net income which is HUF 15.6 bn.
• MTEL’s 12M rolling profit reached HUF 68.5 bn. Conservatively, if we subtract all of the 12m cumulated one-offs from 12m rolling profit we end up with HUF 58 bn which serves as a base for shareholder remuneration, implying a 35 – 46 per share shareholder remuneration for 2023 (yield of 8.9% - 11.6%).

 

Key positives:

1. RGU additions were very strong +129k on a quarterly basis (vs. the avg. of 36k in the last 8 years), implying weak competition.
2. monthly mobile data usage was up by +30% y-o-y (8.7Gb); mobile data revenue was up by 24% y-o-y
3. Gain on sale item will not be subtracted from adjusted net income, which serves as bases for shareholder remuneration.
4. Strong cost control – indirect cost declined by 1% y-o-y while revenue increased +8% y-o-y
5. Excluding one-offs EBITDA increased by 17% y-o-y

Key negatives:

1. Revenue from SI/IT declines (-5% y-o-y) showing 4IG increasing market share, in our view.