SNTS | SONATEL : Solid resilience..., not priced into the stock

A "leadership" preserved in all countries of presence
The incumbent telecommunications provider of Senegal (SONATEL), a subsidiary of the Orange Group, is a key player in West Africa. The company is active in Fixed Line telephony, Mobile, Internet Services, Mobile Money segments as well as in new services related to the use of Data.

At the end of 2022, Sonatel maintains a leading position in the countries of presence:

- Senegal : incumbent operator with a market share of 59% and a Mobile penetration rate of 120%. Sonatel's positioning in the Mobile Money segment has been impacted by the arrival of the new entrant Wave. The latter has caused an 80% drop in price in this segment;

- Mali : market leader with a market share of 53% and a Mobile penetration rate of 106%. The operator experienced a slight decline in its market share of -0.5 pt in 2022;

- Guinea : market leader with 66% market share and 102% Mobile penetration rate. The operator was able to improve its market share by +6 pts in 2022;

- Guinea-Bissau : market leader with a market share of 61% and a Mobile penetration rate of 113%. The operator improved its market share by +2 pts in 2022;

- Sierra Leone : despite strong competition, Sonatel maintains its leading status with a market share of 52%, down -3 pts in 2022. Taking into account a Mobile penetration rate of 89%, this market has a higher growth potential.

An appreciable resilience in a more constraining environment In a restrictive inflationary and regulatory context, we have revised Sonatel's annual revenue growth profile to +5.4% during the 2022-2025E period against +7.3% over 2019-2022. Mobile Data remains the main growth driver with an AAGR of +12.3% and a revenue contribution of
37.0% over the same period.

The ability to defend an EBITDA margin above 40.0%, is supported by the new cost efficiency plan. This would allow Sonatel to maintain a profit capacity of around FCFA 260 Bn over the next two years. Thus, the Group would have an interesting leeway in terms of its payout in order to return to a DPS above FCFA 1,500.
Sonatel stock : attractive entry points for a MT investment horizon Based on our conservative valuation assumptions, we come out with a target price for Sonatel stock of FCFA 19,674, offering an upside of +25%(1) . During the 2023E-2025E period, the stock displays one of the best "P/E-D/Y" pairs within the BRVM, i.e. 5.9x and 9.2% respectively.


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