Airtel Africa’s H1 2024 numbers were buoyed largely by growth in mobile money revenue (up 25.5% y/y to US$416m) and data revenue (+5.9% y/y to US$915m) amidst a decline in voice revenue (-4.6% to US$1.16m). However, the company’s bottom line performance was significantly impacted by FX losses, which resulted in a spike in the company’s Net Finance Cost (+144.1% y/y to US$873m), causing Profit before Tax to decline by 97.7% y/y to US$12m compared with US$330m in H1 2022.
The growth in mobile money revenue was driven by growth in both East Africa and Francophone Africa (+26% and +21% respectively). The management communicated the existence of untapped opportunities for mobile money revenue growth across its African footprints, given the limited penetration of traditional banking services in those climes. We believe Airtel Africa is well-positioned to benefit from further growth in mobile money and data penetration in Nigeria’s telecommunications industry. Additionally, the significant investments made by the firm in network infrastructure and in expanding data coverage should help improve the quality of the company’s services.
That said, we believe the increase in the company’s net finance cost as a result of the naira devaluation amidst only a marginal growth in Revenue will impact the company’s profitability in the short term. We maintain our price target of N1466.4/s but we downgrade to a SELL recommendation as our target price implies an 18.1% downside from the last closing price of N1790/s on 07 November 2023. We arrived at our target price using a Discounted Cash Flow (DCF) and Relative valuation assigning a weighting of 60:40.