Etihad Etisalat Company SJSC "Good underlying Q1 growth, but limited..."

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Etihad Etisalat Company SJSC "Good underlying Q1 growth, but limited..."

Etihad Etisalat Company SJSC UBS Research

Impact from lower device sales than expected

Mobily’s Q1 sales fell short of consensus estimates by 1%, an outcome we attribute to

weaker device sales not only for Mobily but across the broader market. Our analysis

indicates that device sales declined by approximately 60% y/y, primarily due to supply

chain disruptions. This section looks at the resulting effects on both revenues and gross

profit margins, and considers the potential impact should device sales recover over the

remainder of the year. Although management delivered EBITDA margins above

expectations this quarter, aided by a more favourable business mix, guidance for FY2026

EBITDA margins remains unchanged. This cautious stance likely reflects concerns that a

recovery in device sales could exert downward pressure on margins in the upcoming

quarters, especially as management has observed signs of improvement in device sales.

Had device sales maintained an underlying growth rate of around 2%, Q1 device sales

would have reached SAR285m, compared to the SAR118m actually recorded. This

shortfall equates to SAR167m in lost device sales, representing roughly two months of

sales either missed or deferred during the quarter. As a result, overall Q1 revenues were

around 3% below expectations in our view. With management signalling gradual

improvement, our base case assumes a further month of lost sales—SAR87m—

particularly in April, bringing total lost device sales over the past three months to

SAR250m. From Q2 onwards, we expect conditions to stabilise, with a recovery of

deferred sales likely in Q3 and Q4, predominantly in the final quarter.