Citi Keeps Neutral Outlook on Telia with SEK 31 Price Target
Citi's Neutral Rating on Telia Company AB
Citi has reaffirmed its Neutral rating regarding Telia Company AB (OTC: TLSNF), maintaining a steady price target of SEK 31.00. This decision comes in light of Telia's recent disclosures during its Capital Markets Day (CMD), where it laid out its mid-term financial aspirations.
Financial Targets Set During the Capital Markets Day
During the CMD, Telia outlined ambitious goals, including a compound annual growth rate (CAGR) of 2% for service revenue and an impressive 4% for EBITDA, all while endeavoring to keep capital expenditures under SEK 14.5 billion. This balanced approach illustrates their commitment to sustainable growth.
Free Cash Flow Growth Projections
By the fiscal year of 2027, Telia is optimistic about nearly doubling its free cash flow (FCF) from the current levels. They project a minimum FCF of SEK 10 billion, which signifies a strong potential for financial health moving forward.
Increased Dividend Expectations
The telecommunications firm also plans to incrementally increase its dividend per share (DPS) starting from SEK 2, anticipating a boost by a low to mid-single digit percentage. This gradual increase reflects Telia's strategy to provide consistent returns to its shareholders.
Potential for Additional Shareholder Returns
Interestingly, Telia is contemplating the possibility of delivering additional shareholder returns by divesting non-core assets. This strategic initiative could enhance shareholder value significantly, provided the market conditions are favorable.
Challenges Ahead for Financial Strategy
The overarching success of Telia's financial strategy leading up to 2027 hinges on its capability to meet the projected EBITDA growth. Attaining this goal will depend on moderate increases in revenue while simultaneously driving down costs—a challenge Telia has historically encountered.
Outlook on Dividend Per Share
Should Telia maintain its cost-saving advantages, there is a promising possibility for an upside in its dividend per share, which is particularly encouraging given the anticipated growth in free cash flow. Investors and analysts alike are keen to see how the company navigates this crucial period.
Conclusion
In summary, Citi's consistent Neutral stance on Telia Company AB underlines a cautious optimism regarding the company's mid-term goals and financial health. As Telia aims for growth while managing expenditures, stakeholders will be watching closely to gauge the effectiveness of these strategies.
Frequently Asked Questions
What is Citi’s rating on Telia Company AB?
Citi maintains a Neutral rating on Telia Company AB with a price target of SEK 31.00.
What financial goals did Telia announce during its CMD?
Telia aims for a CAGR of 2% in service revenue, 4% in EBITDA, and to keep capital expenditures below SEK 14.5 billion.
How much does Telia project its free cash flow will grow by 2027?
Telia anticipates nearly doubling its free cash flow, aiming for at least SEK 10 billion by 2027.
Will Telia increase its dividends?
Yes, Telia plans to gradually increase its dividends per share starting from SEK 2.
What might affect the success of Telia's financial strategy?
The success depends on achieving projected EBITDA growth, modest revenue increases, and cost reductions.
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