Vodacom Group (VOD SJ): Buy: Focus on earnings growth and deleverage; DPS growth de-prioritised

研报英文原文证据摘录

Vodacom Group (VOD SJ): Buy: Focus on earnings growth and deleverage; DPS growth de-prioritised

Equities ● Wireless Telecommunications

28 July 2026

Focus on earnings growth and

deleverage; DPS deprioritised

◆ Vodacom cuts DPS guidance as it focuses more on earnings

growth/deleveraging; we now forecast c13% EPS CAGR

◆ Even at <1.5x Net Debt/EBITDA, B/S is strong with solid EPS /FCF

outlook, hence a higher DPS payout is still feasible

◆ We cut DPS forecasts but maintain Buy as we note management

focus on deleveraging/earnings growth. TP ZAR180 (from ZAR185)

Medium term guidance

◆ Group service revenue growing double-digit (unchanged)

◆ Group EBITDA growing early-teens (upgraded from double-digit)

◆ Group operating free cash flow growing early-teens (upgraded from double-digit)

◆ Group capital expenditure of 13.5-14.5% as a percentage of Group revenue (unchanged)

Changes in estimates

We update 1Q FY27 actual numbers and refresh 2QFY27 FX based on spot rates. We also

revise estimates in line with new medium-term guidance. Vodacom completed the Safaricom

deal (purchase of incremental 20% stake and taking overall ownership to 55%) effective 30 June

2026 and expect to consolidate Safaricom from 1 July 2026 onwards. Based on this, we moved

Safaricom consolidation to 2Q FY27 (from 3QFY27 earlier). This extra quarter of Safaricom

consolidated numbers mainly drives changes in our FY27 estimates. We also increase our D&A

estimates for consolidation of SCOM assets and amortisation of purchase price allocation.

Together, these changes drive c2% decline in our FY28-29e net income on average. Finally, we

cut our FY27-29e dividend payout estimates to average 70% (vs c82% average earlier) in light of

new dividend policy which drives our lower DPS.

Exhibit 1: Change in estimates (ZARm)