DIGI Communications: heavyweight European telco champion (upgraded to BUY)

We upgrade our rating on DIGI Communications (DIGI) to BUY (from Hold) and lift our price target (PT) to RON 87.4/share (from RON 38.0), 40% upside potential. We see DIGI as a unique mix of a growth and value telco name. On the one hand, it offers an impressive growth outlook (a 12% 2023-26E EBITDA CAGR), driven by geographical expansion and strengthening its position in the local market; while, on the other, the company holds a valuable infrastructure asset, with the market value, according to our estimates, exceeding its current EV by c.60%. We expect DIGI to continue executing its growth strategy, including mobile and fixed-line network rollouts in Spain, Portugal and Belgium, which is likely to put pressure on the FCF and capex, which peaks at EUR 878m in 2025E, on our forecasts. However, we do not see the levered capex as a drawback for the story, as we believe its own network should support DIGI’s success in these new markets and, if needed, could be monetised profitably (as DIGI proved with its FTTH deal in Spain). On our forecasts, DIGI is trading at 2025-26E EV/EBITDAs of 4.7-4.4x, at 11-8% discounts vs. its peers.