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Citi reaffirmed its Neutral rating on Telia Company AB (ST:TELIA:SS) (OTC: TLSNF), with a steady price target of SEK31.00. The telecommunications firm recently shared its mid-term financial goals during its Capital Markets Day (CMD), where it outlined aspirations to achieve a compound annual growth rate (CAGR) of 2% in service revenue and 4% in EBITDA, while keeping capital expenditures below SEK14.5 billion.
By 2027, Telia anticipates nearly doubling its free cash flow (FCF) from the fiscal year 2023 levels, aiming for a minimum of SEK10 billion. The company also plans to incrementally increase its dividend per share (DPS) from SEK2 by a low to mid-single digit percentage. Additionally, Telia may provide extra shareholder returns through the divestiture of non-core assets.
The success of Telia's financial strategy through fiscal year 2027 is dependent on achieving the projected EBITDA growth, which involves modest increases in top-line revenue and reductions in costs. Historically, Telia has faced challenges in these areas.
However, if the company manages to preserve the majority of its cost-saving benefits, there could be a potential upside to the dividend per share, especially considering the expected expansion in free cash flow.
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