April 27, 2023/CSL Research
MTN Nigeria’s Q1 2022 UNAUDITED results released today showed the company sustained the momentum in its Revenue growth, reporting a 20.6% y/y growth in Revenue to N586.14bn from N470.98bn in Q1 2022. On a q/q basis, Total Revenue increased by 2.2% to N568.1bn in Q1 2023 from N556.14bn in Q4 2022. The growth in Service Revenue (up 20.5% y/y to N565.94bn) remained the major driver of the rise in Total Revenue.
Data Revenue remained strong in Q1 2023 increasing by 40% y/y to N227.84bn from N162.73bn in Q1 2022. The growth in Data Revenue could be attributed to the company’s rapid expansion of its 4G and 5G coverage, and the sustained improvement of the quality and capacity of the company’s network to support the rising data traffic. The company reported that the 4G network now covers 79.3% of the population, up from 79.1% in December 2022, and data usage (GB per user) grew by 31.3% to 7.8GB. In addition, the company added over 804,000 new smartphones to its network in Q1, bringing its smartphone penetration to 52.7%.
Also, Voice Revenue continued to grow at a single-digit rate, rising by 7.3% y/y to N277.61bn in Q1 2023. The management attributed the growth in Voice Revenue to its rural expansion program and the increase in voice subscribers which was supported by the company’s revamped voice proposition and increased customer value management. The firm recorded a 9.4% y/y increase in its subscriber base, adding 1.1m subscribers to increase the mobile subscribers to 76.7m in March 2023. Likewise, we note a significant improvement in Fintech Revenue, up 8.6% y/y to N22.69bn and Digital Revenue, up 41.2% y/y to N7.2bn in Q1 2023.
Growth in Direct Network Operating costs surpassed Revenue growth, climbing by 27.4% y/y to N136.65bn in Q1 2023 from N107.28bn in Q1 2022. Operating Expenses excluding depreciation & amortization rose by 20.9% y/y to N128.84bn in Q1 2023 from N106.56bn in Q1 2022. The growth in Opex reflects the continued exposure to Naira depreciation, elevated inflation and unavailability of FX leading to increased costs of lease rentals and additional site rollout. Despite that, EBITDA increased by 17.7% y/y to N302.65bn in Q1 2023 from N257.15bn in Q1 2022. In addition, EBITDA margin shrunk, by 133bps y/y to 53.3% in Q1 2023. Operating Profit grew by 15.2% y/y to N206.62bn in Q1 2023 from N179.33bn in Q1 2022 despite an increase in Depreciation & Amortisation to N96.03bn in Q1 2023.
Net Finance Cost increased, up 42.2% y/y to N50.84bn in Q1 2023 from N35.74bn in Q1 2022. The elevated Net Finance Cost mirrors the 44% y/y increase in Finance Cost despite a 57.3% y/y rise in Finance Income. The increase in Finance Income was driven by higher interest earned on amortized investments (up 97.7% to N5.60bn). On the other hand, Finance Costs rose mainly due to the company’s exposure to the foreign exchange crisis, with net FX loss increasing by 559.8% to N11.82bn and the increased interest expense on borrowings (up 30.2%)
Pre-tax Profit increased by 8.5% y/y to N155.78bn in Q1 2023 from N143.59bn in Q1 2022 while Net Profit rose by 4.6% y/y to N101.30bn in Q1 2023 from N96.82bn in Q1 2022. Consequently, EPS rose to N4.98/s in Q1 2023.
We have a target price of N275.82/s with a BUY recommendation on the stock. Current price; N230.00/s.
| MTN Nigeria N’m | Q1 2023 | Q1 2022 | y/y | Q1 2023 | Q4 2022 | q/q |
| Revenue | 568,136 | 470,984 | 20.6% | 568,136 | 556,137 | 2.2% |
| Direct Network Operating Costs | (136,645) | (107,275) | 27.4% | (136,645) | (125,107) | 9.2% |
| Profit after direct costs | 431,491 | 363,709 | 18.6% | 431,491 | 431,030 | 0.1% |
| Total Operating Expenses | (128,841) | (106,561) | 20.9% | (128,841) | (141,230) | -8.8% |
| EBITDA | 302,650 | 257,148 | 17.7% | 302,650 | 289,800 | 4.4% |
| Depreciation | (78,824) | (65,545) | 20.3% | (78,824) | (78,262) | 0.7% |
| Amortisation of Intangible Assets | (17,207) | (12,277) | 40.2% | (17,207) | (15,919) | 8.1% |
| Operating Profit | 206,619 | 179,326 | 15.2% | 206,619 | 195,619 | 5.6% |
| Finance Income | 7,214 | 4,587 | 57.3% | 7,214 | 5,060 | 42.6% |
| Finance Cost | (58,049) | (40,325) | 44.0% | (58,049) | (67,380) | -13.8% |
| Profit/(Loss) before Tax | 155,784 | 143,588 | 8.5% | 155,784 | 133,299 | 16.9% |
| Income Tax Expense | (54,481) | (46,768) | 16.5% | (54,481) | (43,461) | 25.4% |
| Profit After Tax | 101,303 | 96,820 | 4.6% | 101,303 | 89,838 | 12.8% |
| Net fair value gain/(loss) on financial assets held at FVOCI | (1,195) | 52 | n/a | (1,195) | – | #DIV/0! |
| Total Comprehensive Income/(loss) | 100,108 | 96,872 | 3.3% | 100,108 | 89,838 | 11.4% |
| Earnings Per Share | 4.98 | 4.76 | 4.6% | 4.98 | 4.41 | 12.9% |
| Margins: | Q1 2023 | Q1 2022 | y/y bps | Q1 2023 | Q4 2022 | q/q bps |
| EBITDA | 53.3% | 54.6% | -133 | 53.3% | 52.1% | 116 |
| Operating | 36.4% | 38.1% | -171 | 36.4% | 35.2% | 119 |
| PBT | 27.4% | 30.5% | -307 | 27.4% | 24.0% | 345 |
| Net margin | 17.8% | 20.6% | -273 | 17.8% | 16.2% | 168 |
Source: Company data, CSL Research
