Telstra Group Ltd (ASX: TLS) shares are on the move on Thursday after investors responded positively to its half year results.
In morning trade, the telco giant's shares are up 4% to $4.07.
Telstra shares higher on results day
As we covered here earlier, Telstra reported a 0.9% increase in total income to $11.8 billion for the first half of FY 2025. And thanks to a reduction in operating expenses, its underlying EBITDA grew 6% to $4.25 billion and its net profit after tax increased 7.1% to $1.1 billion.
Goldman Sachs was impressed with its performance, noting that its income and EBITDA was ahead of its forecasts. It said:
Income/EBITDA/NPAT of A$11.8bn/A$4.25bn/A$1.03bn, which was +2%/+2%/-2% vs. GSe, and +0%/+1%/-1% vs. Visible Alpha Consensus Data estimates.
Telstra reported a solid result, with Mobile EBITDA (+1% vs GSe) driven by strong postpaid subscribers (+48k vs GSe +45k) although prepaid subscribers were impacted by (-191k vs GSe) price rises and 3G network shutdown, while handset revenue was ahead (+10% vs GSe, +4% vs VAe). Despite the stronger handset revenue, mobile EBITDA margins grew sequentially (46.7% vs 1H/2H24 47.1%/46.6%).
Guidance on track
In light of this solid half year result, the broker believes that Telstra is on course to at least achieve the midpoint of its underlying EBITDA FY 2025 guidance range of $8.5 billion to $8.7 billion. It adds:
FY25 tracking strongly, guidance re-iterated: We note annualised 1H25 underlying EBITDA is $8,496mn, the bottom end-of FY25 guidance, but with Telstra to additionally benefit from: (1) cost out benefits in 2H25 ($67mn remaining in $350mn program); (2) full period benefit of postpaid mobile price rises (GSe c.$30mn EBITDA); (3) Lower FX headwinds in Other (c.$30); partly offset by (4) non-repeat of Digicel benefit ($39mn).
Hence we believe Telstra is comfortable tracking towards A$8.6bn+ of FY25 EBITDA (GSe $8.61bn, VAe $8.59bn). We also note D&A is expected to be lower in 2H25 (vs. 1H25) vs. GSe +$13mn, implying a strong 2H EPS performance.
Should you invest?
As things stand, Goldman Sachs remains very positive on Telstra's shares and sees plenty of value in them.
The broker currently has a buy rating and $4.50 on its shares, which implies potential upside of 10.5% over the next 12 months.
It is also forecasting a 19 cents per share fully franked dividend in FY 2025. This equates to a dividend yield of 4.7%, boosting the total potential return to Y%.
Though, it is worth noting that the broker could amend (for better or worse) its recommendation and valuation once it has run the rule fully over Telstra's results in the coming days.
