Safaricom is expected to release the FY’22 results on 12th may 2022, where we foresee PAT and EPS growing 29.48% y/y to KES 88.92Bn and KES 2.22, respectively. Bottomline growth will be powered by uptick in service revenue (+15.29% y/y) on the back of a recovery in M-pesa revenues (+24.46% y/y to KES 102.86Bn) coupled with an expected slower growth in total operating costs (+12.81% y/y). However, we maintain our expectation of a continued pressure on voice ARPU (-2.00% to KES 252.57) and SMS ARPU (-11.54% y/y to KES 46.66) due to customers preferring other communication channels.

We upgrade our recommendation to BUY from SELL, as the current price has fallen below our target price of KES 38.81. We continue to view the counter as undervalued, with the current target price providing an upside potential of 20.53%. With an interim dividend of KES 0.64 already paid out, we expect a final dividend of KES 0.86 taking the final payout for FY’22 to KES 1.50.