Analysis of Maroc Telecom's stock performance

Since the release of our Recommendation on September 24th 2024 regarding Maroc Telecom, (Cf. Maroc Telecom: Resilience always pays off), the stock have followed an upward trend to reach our target price on February 26th 2025, rising from MAD 94 to MAD 117. This represents a performance of 25% in the space of 5 months for the 2nd largest capitalization of the .

A performance supported both by the resilience of earnings capacity as well as its ability to distribute an attractive dividend yield from 2025E within a context marked by a downward trend in bond rates in Morocco. Based on a slightly revised target price of MAD 122 against to MAD 117 initially, we recommend to HOLD Maroc Telecom stock, mainly due to its dividend yield.

Financial performance of Maroc Telecom

Following the release of Maroc Telecom Group's 2024 annual results and on the sidelines of our conference call with the management, we highlight the following points:

  • Increased competition in Morocco is accentuated by a stricter regulatory framework for the incumbent operator, namely: (1) limited leeway in terms of “offers and promotions” related to unlimited mobile data, ADSL, and FTTH(1) equipment plans, (2) strict control of B2B offers, and (3) continued pricing asymmetry in favor of competitors;
  • Revenues from Fixed-Line in Morocco and international activities demonstrate strong resilience, thanks to the continued expansion of FTTH infrastructure and the sustained growth of Mobile Data, Fixed-Line Internet and Mobile Money services in Africa. However, Mobile activities of African subsidiaries is slowed by the downward trend in Termination rates (TR) and increasing tax pressures (Côte d'Ivoire, Chad, Burkina Faso, Mauritania);
  • The margin gap between Morocco and its international subsidiaries would persist due to sectoral royalties in the countries where it operates. These royalties would represent on average 13% to 15% of their subsidiaries. However, we believe in a gradual reduction of the EBTIDA gap between Morocco and Moov subsidiaries, falling from 14.6 points in 2024 to 11.0 points by 2028E;
  • For the 1st time since 2019, Maroc Telecom would show a normalization of its earnings, with a NIGS of around MAD 6.0 Bn in 2025E. A situation that highlights the issue of . In our opinion, the operator's payout ratio should readjust towards 70%, compared to 100% historically; This scenario is justified by the Group’s intention to strengthen its self-financing capacity in anticipation of major projects, including infrastructure upgrades ahead of the CAN and World Cup, the deployment of 5G, the development of FTTH, and potential acquisitions in Africa. Under these conditions, the average DPS during the period 2025E-2028E stands at MAD 5.0, equivalent to an attractive D/Y of 4.4%.
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