MTNN’s Q1 earnings saw the company grow its revenue 17% y/y to ₦385 billion, riding on a 43% y/y surge in data income. Despite heightened inflationary pressures, which drove operating costs (excl. depreciation & amortization) 15% higher y/y, EBITDA grew 19% y/y to ₦205 billion, propelled by revenue growth. As a result, net profit jumped 43% y/y to ₦74 billion, blowing away our estimate of ₦56 billion. In light of Q1 earnings surprise, we have made some changes to our full year assumptions and now expect after-tax earnings to come in at ₦290 billion (previous: ₦231 billion), bringing our valuation of the company to a one-year target price of ₦228.38. Our BUY recommendation is maintained.

With the suspension of new SIM card registration now lifted, we expect to see some gains in MTNN’s subscriber base going forward. This, alongside rapidly rising smartphone penetration in Nigeria, is expected to continually drive data revenue upward. Going by our revised projections, we expect data revenue to rise 46% to ₦485 billion in 2021, and over the next four years, we see data revenue advancing at a compounded annual growth rate (CAGR) of 25%, possibly surpassing voice revenue as the largest contributor to top line by 2025. Meanwhile, compared to data, we see 2021 voice revenue increasing at a slower pace of 10% to ₦839 billion, amidst intense price competition and increasing preference for cheaper substitutes such as OTT voice calls. With no imminent sign of a slowdown in headline inflation, we forecast a 14% rise in operating costs, and expect EBITDA margin and EBITDA to come in at 53% (2020: 51%) and ₦863 billion (2020: ₦686 billion) respectively. Overall, we expect 2021 after-tax profit to rise to ₦290 billion (up 41%).