Safaricom PLC HY’24 PAT declined 10.06% y/y to KES 27.19Bn driven by a 21.89% increase in operating expenses and a 142.86% jump in finance costs resulting from the continued depreciation of the Kenyan shilling.
Revenues increased 7.29% y/y to KES 164.62Bn which included KES 2.89Bn in revenue from Safaricom Ethiopia. M-Pesa revenue growth accelerated 750bps to 16.49% to KES 66.23Bn driven by increased usage and resumption of bank-to-wallet and wallet-to-bank charges. Voice revenue growth was relatively challenged, posting a 1.94% decline to KES 39.12Bn resulting, in part, from the downward revision of Mobile Termination Rates.
Earnings per Share (EPS) increased 12.50% to KES 0.90 from KES 0.80 in HY’23. The board did not recommend an interim dividend for the period given the continuous capital injection to Safaricom Ethiopia.
Valuation: At the current market price of KES 13.30, the stock is trading at a reasonable valuation of 8.06x P/E compared to frontier peer average of 13.52x. Our preference for Safaricom remains strong given anticipated growth of M-Pesa and Mobile Data and the ongoing expansion in the Ethiopian market. We maintain a BUY recommendation with a target price of KES 23.71 representing a 78.27% upside.