OTE reported Q1 24 results with adj EBITDA(L) +1.2% yoy (Greece +1.5% yoy) and adj net income +4.9% yoy helped by lower depreciation and financials. Main points: a) margin dilution thanks to strong but lower margin ICT and wholesale revenues; b) Romania remains weak; c) FY cash flow reiterated at E470m; d) this was the last conference call of the current CEO.
Conclusion. We reiterate our DO NOT OWN IT (DOI) rating with our PT at E14.5 (from E14.5). OTE’s valuation reflects E540m-E590m FCFE p.a. discounted back at 9%-10% WACC. The stock keeps trading at a 20% discount to EUR peers in EV/EBITDA terms and at a 5% discount in FCF yield terms for 2024-2025, both narrowing from 25% and 10% a quarter ago.

What’s new? OTE published Q4/FY results with Q4 revenues/adj EBITDA(L)/adj net income at +5.1%/+2.8%/+20.2% yoy. Much better sequential growth rates, thanks to Greece (+1.6% yoy EBITDAL) and Romania (E4m from E0m). But also lower financials (-E16m) and depreciation (-E3m). FY 2023 cash flow of E500m came in line with guidance (E104m in Q4).
The negative surprise was the lower cash flow guided for 2024, at E470m, attributed to higher cash taxes; and which OTE sweetened with a higher payout ratio (96% from 84%), distributing E450m (from E425m), via a higher cash mix (66% from 59%), resulting to higher DPS (E0.71 from E0.58) but a lower buy-back (E153m from E175m).

OTE published Q3 results with revenues/adj EBITDA(L)/adj net income at -2.6%/-1.5%/-6.4% yoy. Growth and business trends are the same with Q2, so we have little to add for this quarter. The big news is lower capex for 2023 (from E640m to E620m) with FCFE unchanged at E500m. This implies a lower L4L cash flow number. Which combined with the competitive landscape affecting revenues, is weighing negatively on the investment case.

’If you cannot explain it simply, then you do not understand it well enough.’’ Testing ourselves, we share our understanding of each Greek investment case we cover within a few lines.
Conclusions: Our base case scenario is materializing, i.e., Mitsotakis administration renewing its mandate and Greece avoiding a recession. Equities have re-rated and are +36% YTD, so now…

What’s new? Q1 revenues/EBITDA(L)/net income stood at -2%/0%/+4% yoy. Results failed to improve our visibility on the investment case. It is positive that cash flow guidance was reiterated at E500m (and E425m remuneration). The same goes for competition hardening going forward. Q1 numbers do not reflect the impact from the 8%-26% price cuts last February, given the gradual re-pricing of the customer base. It is positive OTE is not losing market share, with postpaid subs and BB lines up qoq.