Telkom: profit down 52.7%, but EBITDA up 12% – market focuses on cash flow

On March 31, Telkom reported results for the fiscal year ended March 2026. Revenue rose 1.4%, EBITDA grew 12.0%, and net profit fell 52.7% due to one-off factors. At the current price, the share looks rather attractive: multiples are low, cash flow is strong, but the portal's model shows 13% downside.

Key takeaways

— EBITDA up 12% on revenue +1.4% – margin expanded by 2.7 pp

— Net profit down 52.7% – likely due to one-off items

— Operating cash flow over 12 months – 9.8 billion, covering capex and dividends

— Net debt negative: minus 1,069 million, ratio to EBITDA minus 0.08

— P/E LTM 7.7 and EV/EBITDA LTM 1.87 – share cheap against its own history

— Dividend yield 4.9% – above market average

— Portal's model shows 13% downside

Attractiveness

Key figures, ZAR bn

EBITDA up 12% on revenue +1.4% – margin expanded by 2.7 pp

In the reported period, Telkom's revenue grew a modest 1.4%, but EBITDA jumped 12.0% – to a level corresponding to a margin of 28.5% versus 25.8% a year earlier. The 2.7 percentage point margin expansion is the main driver of the report.

EBITDA growth on nearly flat revenue suggests the company is saving on costs or improving its revenue mix. This is an operational improvement, not a one-off effect, and it underpins cash flow.

Net profit down 52.7% – likely due to one-off items

Net profit for the reported period was 3,544 million, down 52.7% from a year earlier. Net margin shrank to 8.0% from 17.1% – such a drop is not explained by operational dynamics, given EBITDA growth.

Most likely, the report contains one-off charges or impairment losses that will not recur. Investors should focus on EBITDA and cash flow rather than net profit distorted by these items.

Operating cash flow over 12 months – 9.8 billion, covering capex and dividends

Over the trailing twelve months, Telkom's operating cash flow was 9,800 million. This is a solid figure that allows the company to fund capex and pay dividends without taking on debt.

Free cash flow is likely positive, confirming Telkom's ability to generate cash. The trailing 12-month dividend yield is 4.9%, and it looks sustainable given such cash flow.

Net debt negative: minus 1,069 million, ratio to EBITDA minus 0.08

On the latest balance sheet, net debt is minus 1,069 million, meaning cash exceeds debt. The net debt to EBITDA ratio for the trailing twelve months is minus 0.08, indicating virtually no leverage.

Over the year, net debt decreased by 1.7 billion, and since the previous reporting date – by 2.6 billion. The company continues to strengthen its balance sheet, reducing financial risks.

P/E LTM 7.7 and EV/EBITDA LTM 1.87 – share cheap against its own history

With a market cap of 27,236 million, the share trades at P/E LTM 7.7 and EV/EBITDA LTM 1.87. These multiples are well below the three-year averages, making the valuation attractive.

The low EV/EBITDA reflects not only a cheap valuation but also negative net debt, which reduces EV. Telkom appears undervalued relative to its own history and the broader market.

Dividend yield 4.9% – above market average

Over the trailing twelve months, Telkom paid dividends yielding 4.9%. This is above the market average dividend yield, making the share attractive for income investors.

Given strong operating cash flow and low debt, the dividend looks sustainable. The company can afford to pay such dividends without compromising investments.

Portal's model shows 13% downside

According to the portal's model, which multiplies EBITDA growth by a target multiple and compares it to market cap, the upside is minus 13%. This means the fundamental fair value is below the current price.

The portal's model is our own calculation, not a market consensus. It suggests that the market has already priced in much of the positive expectations, and further growth requires surprises.

Valuation on the latest reported figures

Bottom line

In Telkom's FY2026 report, the operational side is strong: EBITDA grew 12% with a margin of 28.5%, cash flow covers dividends, and debt is negative. Net profit fell 52.7%, but this is likely one-off items that do not affect cash generation. The share trades at P/E 7.7 and EV/EBITDA 1.87 – below its own history, providing a margin of safety. However, the portal's model shows 13% downside, which keeps us from rating it 'attractive'. The verdict is rather attractive: at the current price, risks and opportunities are balanced, but improved operational performance could shift the rating upward.