August 6, 2025/Cordros Report
We update our views and estimates on MTN Nigeria Communications Plc (MTNN) following the release of its H1-25 results. As anticipated, MTNN sustained its recovery trajectory, delivering a 54.6% y/y growth in revenue and a 14.94ppts y/y expansion in EBITDA margin to 50.6%, culminating in an EPS of NGN19.79. The strong topline performance reflects the full impact of tariff adjustments implemented earlier in the year, alongside a continued expansion in the subscriber base. Following our review, we revise our year-end target price upwards by 62.2% to NGN588.74/s (previously: NGN363.01/s) and maintain our “BUY” rating. The upward revision reflects adjustments to our revenue forecasts to incorporate our revised assumptions for subscriber growth (+8.6% y/y) and a higher (+50.0% y/y) average revenue per user (ARPU). We also revise our EBITDA margin forecast upwards (+11.05ppts y/y) to reflect both the stronger topline and the slower growth in operating expenses. Consequently, we now project a 2025E EPS of NGN53.96 (previously: NGN37.34). On our estimates, MTNN trades on 2025E P/E and EV/EBITDA of 8.9x and 4.4x, respectively.
Earnings outlook strengthens on topline and margin tailwinds: We now forecast a 64.1% y/y increase in service revenue for 2025E (previous: +57.1% y/y), reflecting an upward revision to both our ARPU and subscriber count estimates. Precisely, ARPU is now expected to rise by 50.0% y/y to NGN5,227.81 (previous: 45.0% y/y to NGN5,053.55), while subscriber base is now projected to grow by 8.6% y/y to 87.84 million (previously: 7.6% y/y to 87.03 million). Data revenue is expected to remain the primary growth driver (+72.7% y/y; 49.8% of total service revenue), while voice is expected to rise by 70.0% y/y (34.0% of revenue). Both segments will benefit from the implementation of revised mobile tariffs and continued expansion in the user base. Furthermore, we revise our EBITDA margin estimate upward to 50.4%, underpinned by strong topline performance and a more measured growth in total expenses (+34.2% y/y vs. previous: +37.9% y/y). Additionally, we lower our net foreign exchange loss forecast to NGN69.16 billion (previous: NGN235.93 billion | 2024FY: NGN925.36 billion), supporting a 64.0% y/y decline in net finance costs. Overall, we maintain our expectation of a full return to profitability in 2025E, with EPS now projected at NGN53.96, up from our previous forecast of NGN37.34.
Dividend prospects brighten with profit recovery: We maintain our view that MTNN will resume dividend distributions in 2025E. Having sustained a consistent payout track record from 2018FY through H1-23, we believe the projected turnaround to profitability will restore key balance sheet metrics to positive territory. For 2025E, we forecast profit after tax of NGN1.13 trillion, net assets of NGN673.28 billion, and retained earnings of NGN523.28 billion. Based on these, we estimate a dividend per share of NGN19.96, implying a 37.0% payout ratio (80.0% of retained earnings).
Valuation: Our year-end target price is NGN588.74/s, derived from a 60/40 blend of DCF and sector-relative valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN630.67/s) and FCFE (NGN403.77/s) estimates, assuming a 21.0% WACC, 30.6% CoE and 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN759.23/s) and P/E (NGN632.80/s) estimates, utilising Bloomberg’s Middle East and African peer averages for both factors (5.6x and 14.1x, respectively) as multipliers.
