The release of Maroc Telecom 2022 mid-term achievements occurs in a context which it is not very favourable to revenue growth. In addition, this H1-22 was marked by the recognition of a provision for a penalty payment applied by the Moroccan regulator to the incumbent operator for an amount of MAD 2.45 Bn. Under these conditions, we have revised our growth assumptions for the Group and consequently our stock’s valuation.

At the end of this exercise, we downgrade our target price from MAD 150 to MAD 134.
Based on a stock market price of MAD 121 (price on August 24th, 2022), we believe that the recent stock’s decrease remains disproportionate to the quality of its fundamentals.

Our analysis is structured around five key messages :

- Regulatory constraints and competitive pressures in Morocco are increasingly impacting the growth profile of Maroc Telecom's Mobile revenue. At the origin, a limited leeway in terms of « Offers & Promotions » compared to competitors, a stricter framework for specific B2B Offers and a maintaining of a tariff asymmetry at the
expense of the incumbent operator ;

- Revenue of Fixed-Line in Morocco and international activities demonstrate good resilience thanks to the continued expansion of the broadband Internet customer « ADSL & FTTH » and the sustained growth of Mobile Data in Africa. However, Mobile revenue growth of African subsidiaries is slowed by the downward trend in Termination rates (TR) whose impact is expected to continue in 2023 ;

- We believe that inflationary pressures in Morocco will weigh more on Mobile revenue growth in H2-22. Our opinion is supported by the historical correlation established between the general price level and telecommunications expenditure, particularly by Prepaid Mobile users. The latter represent approximately 90% of the mobile
fleet in Morocco ;

- In an unfavourable context for cash generation, we are witnessing a downward readjustment of the payout(1). This went from a historic level of around 100% to an average of 70% over the period 2019-2021. According to our own scenario, the Group's target payout(1) would now settle between 70 and 80% during the period 2022-2023 ;

- Taking into account the recent drop of the stock, the offered D/Y becomes relatively more attractive. This is an average D/Y of 4.5% over the period 2022-2023 compared to 3.5% for the Equity market.

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