Russian state integrated telecom major Rostelecom reported 9% year-on-year revenue growth to RUB132bn in 1Q21 under IFRS, with key top line drivers being mobile revenues (+13%). Rostelecom's EBITDA was up 18% year on year to RUB55bn making a 42% margin, and net income was up by 58% to RUB11.8bn.

As followed by bne IntelliNews, in 2019 Rostelecom consolidated control in the "big four" mobile operator Tele2.

Rostelecom is also the largest recipient of B2G projects and is involved in numerous state-driven IT projects. The company intends to maintain and expand its role as a key partner in the digitisation of the state. Rostelecom is also in focus regarding the planned rollout of 5G in Russia.

BCS Global Markets on May 13 commented that the 1Q21 results are solid and likely suggest upside to traditionally conservative company guidance, which for now was still left unchanged. 

BCS GM affirmed a Hold call on Rostelecom's shares, while suggesting focusing on trends in revenue segments, competitive environment and market trends in mobile segment, as well as the general outlook for 2021, for free cash flow (FCF) and capex.

In April Rostelecom held an Investor Day at which it targeted over RUB700bn ($9bn) in revenues in 2025, achieving 5% annual growth in 2021-2025, boosting Ebitda by over 50% at 8% annual growth and doubling net income. However, the company maintained a conservative dividend policy.

In the meantime, digital cluster services (data centres and cloud, information security, digital medicine, digital region, e-government and other) by 2025 should account for 25% of revenues. Rostelecom targets a top market position in each of the segments and also plans to monetise the businesses through strategic partnerships and IPOs.

On May 13 BCS GM confirmed a Hold recommendation for Rostelecom after its strategy update, with a 9-10% higher target price of RUB120/ordinary share and RUB110/preferred share (0 and 5% estimated return respectively).

While BCS GM analysts appreciate the strong presence in growing data centre/cloud segment, they find a 5-6% dividend yield "uninspiring". 

"[Rostelecom's ]EBITDA was visibly boosted by the positive one-off effect from the provision release," Sberbank CIB commented on May 14, noting that adjusted for that, the numbers were generally in line with expectations. 

Sberbank CIB also sees Rostelecom as on track to meet its full-year guidance and suggests watching Rostelecom's ability to collect government receivables.