PETALING JAYA: CelcomDigi Bhd
is poised for a stronger earnings trajectory as operational efficiency savings are expected to accelerate in the second half of the financial year ending Dec 31, 2026 (2H26), according to research houses RHB Research and Hong Leong Investment Bank (HLIB) Research.
RHB Research maintained its “buy” call on CelcomDigi while raising its target price (TP) to RM3.70 from RM3.50, implying 30% upside from its market price of RM2.84.
The research house said the company’s 1H26 results were broadly in line with expectations, with operational excellence savings set to ramp up in 2H26.
“We see the stronger realisation of operational expenditure savings fuelling double-digit earning per share growth for financial year 2027 (FY27)/FY28,” RHB Research said, adding that CelcomDigi trades at more than a 20% discount to its five-year historical enterprise value-to-earnings before interest, taxes, depreciation, and amortisation (Ebidta) mean, which it deemed inexpensive given the stock’s improving risk-reward profile.
HLIB Research also maintained its “buy” recommendation and RM3.70 TP, saying there was scope for margins to improve in 2H26, supported by stronger cost discipline and continued operational efficiencies.
It added that the market had likely priced in much of the uncertainty surrounding Digital Nasional Bhd (DNB).
“We are constructive on management’s ongoing focus on cost discipline, which should support further improvement in the margin trajectory by end-2026,” HLIB Research said.
For the second quarter of this financial year (2Q26), CelcomDigi’s core profit after tax and minority interest came in at RM430mil, up 3% quarter-on-quarter but down 1% year-on-year (y-o-y), bringing 1H26 core earnings to RM848mil.
This represented 48% and 49% of RHB’s and consensus full-year forecasts respectively. However, Ebitda fell 3.3% to RM1.37bil as higher traffic charges and universal service provision fees offset savings elsewhere.
Y-o-y, service revenue grew 1.4%, with postpaid and home and fibre revenue rising 2.7% and 33.8% respectively, more than offsetting a 3.2% decline in prepaid.
Cost savings remain a key earnings driver. CelcomDigi achieved RM141mil in operational excellence savings in 1H26, including RM100mil in 2Q26, although this was partly offset by RM101mil in identified cost increases.
RHB Research expects the company to achieve its upgraded RM470mil FY26 savings target, implying a sizeable pickup in 2H26.
Meanwhile, DNB remains a key overhang. HLIB Research expects its loan restructuring and equity transfer to be completed by end-3Q26, with CelcomDigi beginning to equity-account DNB losses from 4Q26.
Assuming DNB incurs RM700mil to RM800mil in losses in 2026, CelcomDigi’s share would be about RM58mil to RM67mil, representing less than 5% of its FY26 earnings.
Looking ahead, RHB Research forecasts recurring net profit to rise from RM1.71bil in FY26 to RM1.89bil in FY27 and RM2.25bil in FY28, with dividend yield rising from 5.6% to 6.3% over the same period.
The key catalysts are stronger merger synergies, improving average revenue per user and better-than-expected earnings, while risks include competition, weaker-than-expected synergies, regulatory setbacks and delays to CelcomDigi’s IT upgrades.
An analyst noted that the group began 2026 on a positive footing.
“While some earnings pressure emerged in 2Q26, we expect a stronger performance in 2H26, underpinned by our expectation that the cost-saving initiatives will gain momentum as the group targets higher total savings for 2026,” he told StarBiz.
