Emtel Limited: Undervalued at Rs. 22.70
Emtel reports half-year results ending June 2026, showing profit rose 34% as CAPEX fell 47% . Our DCF puts the shares at Rs 31.02 against a Rs 22.70 close.
Key figures
Last closing price on 7 August: Rs 22.70, below the Rs 23.00 July 2024 IPO price.
H1 2026 profit after tax: Rs 320m, up 34% year on year.
Half-year capital expenditure: Rs 297m, down 47% from Rs 559m. Capex-to-revenue narrowed to 13.9% from 28.3%.
Net debt to EBITDA: 1.4x, versus 2.2x a year earlier. Net debt Rs 3.06bn.
Central DCF value: Rs 31.02, range: Rs 24.79-36.64.
Dividend yield: 6.8%, excluding the Rs 0.88 special declared in December 2025.
Emtel Ltd. reported H1 revenue of Rs 2.14bn, up 8.6%, and profit after tax of Rs 320m, up 34%, in abridged unaudited statements released on 6 August. The stock closed at Rs 22.70 on 7 August, 1.3% below its July 2024 offer price of Rs 23.00.
EBITDA rose 10.8% to Rs 1.07bn. Margin on revenue widened 110 basis points to 49.9%; margin on net revenue reached 55.3%. Service revenue, the recurring component, gained 8.3% to Rs 1.97bn.
Capex inflection
Capital expenditure fell 47% to Rs 297m from Rs 559m, narrowing the capex-to-revenue ratio to 13.9% from 28.3%. That is the single most consequential figure in the release.
Emtel reported 90% island-wide 5G population coverage at 31 December 2025, "marking the completion of our widescale 5G rollout programme which started in 2022," and a fibre footprint of approximately 743km, per its FY25 audited abridged financial statements.
Both are company-reported figures and have not been restated in the H1 2026 release.
Management stated capital investment would run "even lower from FY 26 onwards."
Depreciation and amortisation of Rs 515m in the half still reflects the 2022-25 spending peak.
Net debt narrowed to Rs 3.06bn, or 1.4 times EBITDA, from 2.2 times, at an average cost of 4.75% and average maturity of 2.93 years.
Valuation
Our FY26 revenue sits near Rs 4.44bn and EBITDA of Rs 2.22bn, with capital expenditure normalising at 15% of revenue.
Discounting free cash flow at a 10.0% WACC with 3.0% terminal growth yields an equity value of Rs 31.02 a share, an implied 37% above spot.
These are projections, not reported figures.
Sensitivity spans Rs 24.79 at an 11% WACC and 2.5% terminal growth to Rs 36.64 at 9.5% and 3.5%.
At Rs 22.70 the market prices Emtel below every cell in that grid.
Multiples read differently. Enterprise value of Rs 13.4bn at market puts Emtel on 6.0 times forward EBITDA, against 7.7 times implied by the DCF.
Dividend
The board declared Rs 2.42 a share over the trailing twelve months, a 10.7% yield at spot.
Rs 0.88 of that was a special dividend declared 16 December 2025, funded by the MC Vision disposal and an Rs 800m settlement of a 29-year competition case.
The recurring rate is Rs 1.54, a 6.8% yield against a 4.75% Key Rate.
Free cash flow to equity was negative Rs 266m in the half. Cash fell to Rs 192m from Rs 1.21bn at 31 December after Rs 751m of dividend payments.
The board approved a scrip dividend scheme on 6 August, subject to regulatory approval, allowing shareholders to elect shares over cash. The mechanism preserves headline dividend per share while conserving cash.
Macro risks
The Bank of Mauritius raised the Key Rate 25 basis points to 4.75% on 20 May, the highest since 2013, citing imported inflation from the Middle East conflict. It projects headline inflation averaging 5.5% in 2026 and cut its GDP growth forecast to 2.8% from 3.3%.
The IMF's 2026 Article IV mission, concluded 4 May, projects public debt near 88% of GDP at end-June 2026. The African Development Bank recorded 2025 growth of 3.2% and a fiscal deficit of 9.8% of GDP.
Competitive position
GlobalData's Mauritius Telecom Operators Country Intelligence Report, released 3 February, forecasts total Mauritian telecom service revenue contracting at a 1.2% CAGR through 2029. Emtel's 8.6% growth therefore reflects share gain, not market expansion.
State-linked Mauritius Telecom remains the larger operator. Public disclosure of its current revenue and subscriber split is limited; a like-for-like market share comparison for H1 2026 is not available from filed sources.
Management flagged an advanced-stage "major international connectivity initiative" in the 6 August release. No capital cost, timing or financing structure was disclosed. That is a material unquantified risk to the capex normalisation thesis.
Position
Total equity stands at Rs 1.27bn against Rs 6.97bn of assets. Free float is 25%; the balance is held by Currimjee Jeewanjee & Co. Trading volumes are thin, constraining position sizing.
Emtel trades 27% below our estimation of central intrinsic value of Rs 31.02 and below the entire sensitivity grid, with a cash-covered 6.8% recurring yield. The stock has not re-rated in the 25 months since listing.
That leaves two readings:
Either the market is pricing risks this model does not capture. Perhaps a home market forecast to contract, impact of new levies, a submarine cable of undisclosed cost.
The market has yet to reprice a business that has stopped building and started collecting.
Which one is Rs 22.70 telling you?
Valuation estimates are iegen's own projections and are clearly distinguished from reported figures above. This article is for information only and does not constitute investment advice.
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