SAUDI TELECOM COMPANY

Recommendation history

• Q2 2020HoldHOLD: stc delivered strong top-line momentum, with Q2 revenue up 9.7% year over year and H1 revenue up 6.9%, but the quality of growth is mixed. Expansion in low-margin devices and ICT services, higher operating and network costs, COVID expenses, and rising bad-debt provisions are pressuring EBITDA, while management offered no quantified margin or earnings outlook.
• FY 2022HoldHold: stc delivered a strong FY2022, with revenue up 7.0% to SAR 67.4bn, EBITDA up 9.8% to SAR 25.1bn, and net profit up 7.6% to SAR 12.2bn. However, the call offered no 2023 EBITDA or earnings guidance, while enterprise growth is slowing, Q4 margins were pressured by startup and expansion costs, and SAR 19bn of government receivables remains outstanding.
• Q2 2021HoldHold: stc delivered strong H1 growth, with Q2 revenue up 6.6% to SAR15.9bn, EBITDA up 5.3% to SAR5.6bn and net profit up 3.6% to SAR2.8bn despite lapping roughly SAR650m of prior-year Careem gains. However, gross profit was essentially flat and gross margin fell by more than 300 bps as lower-margin ICT/subsidiary revenue, 5G investment and growth spending increased; without valuation or formal guidance, the call supports a solid operator thesis but not a clean buy.
• FY 2021HoldHold: stc delivered solid top-line momentum, with FY2021 revenue of SAR 63,417m (+7.57%), EBITDA of SAR 22,841m (+3.40%) and net profit of SAR 11,311m (+2.87%). Enterprise revenue grew 20.9% and residential revenue 10.5%, but earnings growth lagged revenue as start-up and expansion businesses pressured gross margins, while management withheld special dividends to fund acquisitions and expansion.
• Q4 2019HoldHold: FY2019 revenue rose approximately 5%, EBITDA increased 7.3% to nearly SAR21 billion, or 3.5% excluding IFRS effects, and net income reached SAR10.755 billion. Enterprise services, fiber, 5G, and stc pay support the growth case, but Q4 net income fell roughly 22%, 2020 capex will remain aggressive, government receivables exceed SAR6 billion for 2017 alone, and management provided no quantified earnings outlook.
• Q4 2019HoldHold: stc delivered solid FY2019 growth, with revenue up approximately 5%, EBITDA up 7.3% to nearly SAR 21 billion (3.5% excluding IFRS), and net income of SAR 10.755 billion. However, Q4 net income fell roughly 22%, 2020 capex is expected to be aggressive for 5G and NBB, enterprise growth carries lower-margin risk, and government receivables remain a working-capital overhang.
• Q2 2022HoldHold: Q2 operating momentum was solid, with revenue up 6.5% to SAR 16.9bn, EBITDA up 10.3% to SAR 6.2bn and adjusted net profit up 11.1% to SAR 3.1bn, supported by margin efficiencies and stable pricing. However, reported net profit was nearly flat after the SAR 298m BGSM impairment, government receivables remain unresolved, and management provided no firm growth or capex outlook while pursuing multiple acquisitions and expansion projects.