- Results came in 0.6-1.7% better than our and consensus estimates on revenue and 4.1-3.5% better on OIBDA
- Moderate 2.3% y/y expansion in Russian mobile revenue was expected
- FL reports solid 4%+ growth, MTS Bank’s revenue came in above expectations; solid retail sales
MTS (MBT US/MTSS RX, E/W, TP $8.7/RUB330) 1Q21 results came in 1.7-0.6% better than our and consensus estimates on revenue and 4.1-3.5% better on OIBDA. Russian mobile revenue moderately grew 2.3% y/y driven by ARPU growth, broadly in line with expectations. The performance of MTS Bank surpassed our and consensus forecasts on revenue and reported strong OIBDA growth. MTS reiterated its 2021 guidance of 4%+ y/y top-line and EBITDA growth and capex of RUB100-110bn, which still looks conservative (while consensus expects 5% y/y expansion). During the conference call we expect investors to be interested in management’s comments on the current mobile market environment and the full-year outlook. Given no major surprise in the 1Q21 numbers and support to the stock from the dividend side, we treat the results as overall neutral for MBT/MTSS.
Moderate 2.3% y/y expansion in Russian mobile revenue was expected. Russian MSR of RUB82.3bn (up 2.3% y/y) came broadly in line with our and consensus estimates. While the number of MTS mobile subscribers remained below 1Q20 (78.4mn, -0.1mn y/y and q/q), the MSR growth acceleration was fully driven by rising ARPU, which advanced 2.4% y/y according to our estimates. In terms of incremental revenue, MTS added RUB1.8bn y/y in Q1 compared to a RUB1.2bn loss by Beeline and RUB5.1bn of revenue by Tele2. MSR should re-accelerate in Q2 already given the tariff adjustments made during Q1 and the disappearance of the roaming-related high-base effect.
FL reports solid 4%+ growth, MTS Bank’s revenue comes above expectations; solid retail sales. Fixed-line dynamics normalized to 4.4% y/y (from 5.3% in Q4), but were still above 3.4% growth for the full 2020. FL growth came broadly in line with our and consensus projections. Revenue was mainly driven by B2C (excl. telephony), which grew 7.5% y/y (vs. 6% in Q4). MTS Bank’s quarterly revenue growth accelerated to 18% y/y (from 2.5% y/y in Q4) to RUB9.8bn, surpassing our and consensus forecasts by 6-8%. The bank reported RUB1.9bn in OIBDA (4.6x higher y/y), implying 19% margin (+14.2pp). Sales of handsets increased 16.4% y/y to RUB15.5bn, being in line with consensus and 2.7% below our forecast. MTS opened 90 new stores net in Q1. Software sales in Q1 grew 53% y/y to RUB1.9bn, but came 24% below our more optimistic estimates.
Conference call: MTS management will host a conference call today at 6pm (Moscow) / 3pm (London) / 10am (New York). Dial in numbers: Russia: +7 495 646 9315; UK/ International: +44 207 194 3759; USA: +1 844 286 0643; PIN 47897830#.
Figure 1. MTS 1Q21 IFRS results
Source: Company data, consensus collected by the company, Alfa-Bank
Figure 2. MTS comparison with Big-4 competitors
Source: Company data, Bloomberg, Alfa-Bank
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The contents of this document have been prepared by Joint Stock Company “Alfa-Bank” ("Alfa Bank") as Investment Research within the meaning of Article 36 of Commission Delegated Regulation (EU) 2017/5...