In FY 2023, MTN Nigeria saw substantial growth driven primarily by double-digit increases in both voice (+10% y/y to N1.14 billion) and data revenue (+40% y/y to N1.07 billion), despite experiencing inflationary pressures on Operating Expenses (+26.80% y/y to N615.82 billion). For 2024, we anticipate MTN Nigeria will sustain its robust topline growth. Our projections indicate a 45% y/y growth in data revenue and an 8% y/y growth in voice revenue. Overall, we forecast a 26.1% y/y increase in Revenue to N3.11 trillion in 2024 from N2.47 trillion in 2023.
MTNN was impacted significantly by the devaluation of the Naira resulting in the company reporting a huge Loss Before Tax of N177.8bn in FY 2023 compared with a Pre-tax Profit of N518.82bn in FY 2022, completely wiping out shareholders’ funds. The company reported a massive FX loss of approximately N740bn in 2023 compared with only N81bn in FY 2022. The significant FX loss recorded in Q4 2023 could be attributed to the revaluation of the company’s tower lease contracts and foreign borrowings in Q4 2023.
We anticipate that with the country's exchange rate stabilizing at current levels, MTN will return to profitability in 2024. Our forecast suggests a Profit Before Tax (PBT) of N105.73 billion for 2024. However, we do not expect the company to fully restore its shareholders' funds this year. We project an improvement in shareholder funds to negative N5.76 billion from the negative N45.04 billion in 2023. A complete recovery is anticipated by the year end 2025.
We have revised our target price down to N257.91/s from N325.30/s, reflecting the decline in the company’s operating performance. However, we maintain our BUY recommendation on the stock. Our target price suggests an upside potential of 11.20% compared to the last closing price of N232/s on 02 April. We arrived at this target price using a combination of Discounted Cash Flow (DCF) and Relative valuation methods, with a weighting of 60:40 respectively. Currently, MTN trades at an EV/EBITDA ratio of 5.5x, slightly below its industry average of 5.7x
