MTN Nigeria’s 9M 2023 Revenue growth was driven largely by double-digit growth in voice ((+10.6% y/y to N834bn) and data revenue ((+36.4% y/y to N749.53bn), amidst inflationary growth in Operating Expenses (+22.2% y/y to N417.42bn). A 174.41% y/y increase in Net Finance Cost to N375.96bn contributed significantly to the decline in Pre-tax Profit, which was down 42% y/y to N232.47bn in 9M 2023 from N400.67bn in 9M 2022.
We believe that the firm's recent lease agreement with NTEL for an additional 10MHz frequency division duplex (FDD) in the 2.6GHz spectrum in September 2023, and the earlier agreement reached in May for 900MHz and 1800MHz spectrum bodes well for the company's future, as it should enable the company expand its coverage and capacity of its network more efficiently in order to meet rising demand for data and improve the quality of its offerings and customer experience.
We maintain our positive medium to long-term outlook on MTN Nigeria, we believe the company is well positioned to benefit from further growth in mobile and data penetration in Nigeria’s telecommunications industry. Additionally, the significant investments made by the firm in improving its 4G and 5G network infrastructure and expanding data coverage indicate that the company is well primed to attract new customers to its network.
We maintain our Buy recommendation on MTNN with a target price of N318.20/s. Our target price implies an upside potential of 32.58% compared to the last closing price of N240/s implies 0n o2 November. We arrived at our target price using a Discounted Cash Flow (DCF) and Relative valuation, assigning a weighting of 60:40.