Article Highlights
- Strong Revenue Growth Propelled by Data-Generating Segment and Subscriber Expansion
- Efficient Cost Control Boosts Operating Profit and Margin.
- Evaluating Analysts’ Projections and Overcoming Macroeconomic Challenges
MTN Nigeria Communication Plc, a leading telecommunications company, released its audited results for the 2022 fiscal year on February 1, 2023. The company reported a remarkable 21.64% year-on-year growth in revenue for 2022, crossing the N2 trillion mark. Furthermore, the company’s profit after tax increased by 20.16% to N358.777 billion compared to N298.654 billion the previous year, resulting in earnings per share of N17.79, up from N14.67 in the previous year.
The impressive revenue growth in 2022 can be attributed to a 48.02% increase in the data-generating revenue segment, which amounted to N763.938 billion, compared to N516.098 billion in 2021. The growth in mobile and active fintech subscribers and active data users also contributed to the overall revenue growth. The company witnessed a 10.5% increase in mobile subscribers, reaching 75.6 million, with an additional 7.2 million subscribers in 2022.
MTN Nigeria’s operating profit and margin improved due to efficient cost control measures. The operating profit grew by 25% year-on-year to N733.298 billion, resulting in an increased operating profit margin of 36%. The Consumer Business Unit, which includes mass segments, accounted for approximately 86% of the company’s total revenue, demonstrating its strong market share.
While the results are impressive, it is essential to assess whether they met or exceeded analysts’ projections. Comparing the reported earnings per share (EPS) of N17.79 for 2022 with analysts’ earnings projections, it appears that the company fell short of expectations. Bloomberg had projected an EPS of N18.41 by December 2022, indicating a missed earnings target.
The year 2022 presented challenges not only for the telecom industry but also for various other sectors. Karl Toriola, the CEO of MTN Nigeria, acknowledged the difficult operating environment characterized by global macroeconomic and geopolitical volatility, higher inflation, supply chain uncertainties, and foreign exchange fluctuations.
Due to these macroeconomic headwinds, particularly foreign exchange challenges, MTN Nigeria experienced a significant boost in net foreign exchange losses, resulting in a 33.19% increase in finance costs for the 2022 fiscal year, amounting to N213.094 billion compared to N159.998 billion in 2021. This contraction in net profit and margin led to a decline of 1.2% to 17.83% and affected the overall EPS growth.
Nevertheless, it is crucial to consider MTN Nigeria’s impressive earnings history. Over the past five years (2017-2021), the company achieved a compounded annual growth rate (CAGR) of 38.5%. This means that its profits have grown by an average of 38.5% annually, from N81 billion in 2017 to N298.6 billion in 2021, and further to N358.877 billion in 2022.
At an EPS of N17.79, the company currently trades at a trailing twelve months’ price-to-earnings (P/E) ratio of 12.65x, indicating that investors are paying N12.65 for every N1 in earnings. Compared to the average P/E ratio of 17.8x for peers and 15.2x for the Global Wireless Telecom industry, MTN Nigeria appears undervalued and offers good value to investors.
Furthermore, considering the company’s absolute P/E relative to its past P/E ratios, it is evident that it is currently undervalued. In the past three years (2019-2021), the company’s P/E ratios have ranged between a low of 10.51x and a high of 16.86x. With the current P/E ratio of 12.65x, it is 75% of the 3-year high and approximately 20% higher than the 3-year low.
Additionally, MTN Nigeria’s share price currently provides a dividend yield of 6.95% based on the total final dividend of N15.60 for the 2022 fiscal year. This dividend yield is notable compared to the bottom 25% of dividend payers in the Nigerian market.
The company’s share price has experienced a YTD return of 4.65% this year, and since 2019, it has consistently delivered positive YTD returns. While it may not offer an inflation-protected return at the moment, the company’s pursuit of its Ambition 2025 goals and efforts to increase its market share provide optimism for continued growth in the future.
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