MTS in Q2 2026: profit up 24-fold, but operating cash flow turned negative

On August 25, MTS reported Q2 2026 results: revenue grew 9.2% YoY to RUB 213.5 bn, OIBDA rose 16.3% to RUB 84.6 bn, and net profit surged 1817.4% to RUB 66.9 bn. The review shows that the main contribution to profit came from the sale of towers, while operating cash flow turned negative in the quarter.

Key takeaways

— Net profit of RUB 66.9 bn was almost entirely driven by the sale of towers, not by the operating business

— OIBDA grew 16.3% on revenue growth and cost control, with margin reaching 39.6%

— Operating cash flow turned negative at RUB 32.8 bn in Q2 due to working capital buildup

— Capex of RUB 31.6 bn in Q2 exceeded operating cash flow, increasing reliance on debt

— Net debt rose by RUB 29.7 bn in the quarter and by RUB 98.4 bn over the year, to RUB 651.9 bn

— Dividend of RUB 35 per share yields 19%, well above the fair yield of 12.4% for the stock

— EV/EBITDA multiple of 3.3 is below the three-year average of 4.1, trading at a discount to its own history

Key figures, RUB bn

Net profit of RUB 66.9 bn was almost entirely driven by the sale of towers, not by the operating business

In Q2 2026, MTS net profit reached RUB 66.9 bn versus RUB 3.5 bn a year earlier – a 24-fold increase. The main contribution came from the sale of a stake in tower infrastructure: without this one-off effect, profit would have been an order of magnitude lower, as seen in operating profit dynamics – it grew only 22.4% to RUB 48.2 bn.

The tower sale is a one-off event that does not create recurring cash flow. Investors should focus on operating metrics: revenue grew 9.2%, OIBDA – 16.3%, but it was the asset sale that generated almost all of the quarter's net profit.

OIBDA grew 16.3% on revenue growth and cost control, with margin reaching 39.6%

OIBDA in Q2 amounted to RUB 84.6 bn, up 16.3% YoY. The OIBDA margin reached 39.6% versus 37.2% a year earlier – an improvement of 2.4 percentage points. Growth was driven by higher revenue in telecom and fintech, as well as moderate growth in operating expenses.

In Q1 2026, OIBDA grew faster than revenue (+18.0% vs +14.7%), indicating sustained operating leverage. However, in Q2 the pace slowed: revenue added 9.2% and OIBDA – 16.3%, still higher but the gap narrowed.

Operating cash flow turned negative at RUB 32.8 bn in Q2 due to working capital buildup

Operating cash flow in Q2 was minus RUB 32.8 bn versus plus RUB 79.4 bn a year earlier. The negative value is due to working capital buildup – the company increased inventories and advances, requiring additional financing.

Over the last twelve months, operating cash flow totaled RUB 274.4 bn, covering capex, but in Q2 the dynamics were negative. This is an important signal: even with growing profit, the company faces a liquidity deficit in its operating cycle.

Capex of RUB 31.6 bn in Q2 exceeded operating cash flow, increasing reliance on debt

Capex in Q2 reached RUB 31.6 bn, exceeding operating cash flow (minus RUB 32.8 bn). In Q1, capex was even higher at RUB 44.3 bn, also exceeding operating cash flow (RUB 31.2 bn).

In total for H1, capex amounted to RUB 75.9 bn, while operating cash flow was minus RUB 1.6 bn. This means the company finances investments through debt, as confirmed by net debt growth of RUB 29.7 bn in the quarter.

Net debt rose by RUB 29.7 bn in the quarter and by RUB 98.4 bn over the year, to RUB 651.9 bn

At the end of Q2, MTS net debt stood at RUB 651.9 bn, up RUB 29.7 bn from the previous reporting date and RUB 98.4 bn over the last 12 months. Debt growth is related to financing capex and negative operating cash flow.

Net debt to EBITDA for the last twelve months stands at 2.14 – a level the company has maintained in recent years. However, given rising debt and unstable operating cash flow, this metric could deteriorate if the company does not restore cash generation.

Dividend of RUB 35 per share yields 19%, well above the fair yield of 12.4% for the stock

The board recommended a dividend of RUB 35 per share for 2025, providing a yield of 19% at the current price. This is significantly above the 12.4% level we consider fair for this stock – the market is pricing either sustainability of payments or expectations of rate cuts.

The dividend payment of RUB 69.9 bn is comparable to operating cash flow over the last twelve months (RUB 274.4 bn), but given capex and debt growth, the company may face a shortage of funds to maintain payments at the current level.

EV/EBITDA multiple of 3.3 is below the three-year average of 4.1, trading at a discount to its own history

EV/EBITDA for the last twelve months is 3.3, below the three-year average of 4.1. This means the market values the company cheaper than on average over the past three years, despite profit and revenue growth.

P/E for the last twelve months is 3.4, which also looks low, but given one-off factors in profit (tower sale), this metric may be overstated. Investors should focus on EV/EBITDA, which is adjusted for one-off effects and reflects operating efficiency.

Valuation on the latest reported figures

Bottom line

In Q2 2026, MTS showed strong revenue and OIBDA growth, and net profit was record-high thanks to the tower sale. However, operating cash flow turned negative, and capex exceeded cash generation, leading to higher debt. Dividend yield remains high, but its sustainability is questionable if the company does not restore operating cash flow. The key question for shareholders is whether MTS can return to positive free cash flow without new one-off deals.