Telstra Group Ltd (ASX: TLS) shares were on form on Thursday.
In response to the telco giant's half-year results, its shares climbed to a multi-year high before ending the day at $5.14.
Is it too late to invest? Let's see what Bell Potter is saying about Australia's largest telco.
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What is the broker saying?
Bell Potter was pleased with Telstra's performance during the first half and highlights a number of positives. It said:
The 1HFY26 result contained a few positive surprises: 1. Underlying EBITDAaL grew 6% to $4,185m which was close to in line with our forecast of $4,175m but more significantly above VA consensus of $4,100m; 2. Cash EBIT – the new focus metric for cash flow – grew 14% to $2,478m and was 3% above our forecast of $2,397m; 3. The interim dividend grew 11% to 10.5c and was above our forecast of 10.0c though the franking was only 90%; and 4. The buyback increased from $1.0bn to $1.25bn.
In response to the result, Bell Potter has made only modest (positive) revisions to its estimates for Telstra's earnings. This has resulted in an upgrade to its dividend estimates, but with lower franking. It adds:
There is little if any change in our underlying EBITDAaL forecasts and we continue to forecast $8.41bn in FY26 which is at the top of the narrowed guidance range. We have, however, modestly upgraded our cash EBITDA forecasts by c.1% in each of FY26, FY27 and FY28 and now forecast $4.71bn in FY26 which is towards the top end of the unchanged guidance range. We have also increased our DPS forecasts by 1.0c in each period though we have reduced the franking.
It now expects dividends per share of 21 cents in FY 2026, 22 cents in FY 2027, and then 23 cents in FY 2028.
Should you buy Telstra shares?
According to the note, the broker has retained its hold rating on Telstra's shares with an improved price target of $5.10 (from $4.75). This is largely in line with where its shares are trading today.
Commenting on its recommendation, the broker said:
We have rolled forward our PE ratio valuation and now apply a 23x multiple to our FY27 EPS forecast. We have also rolled forward our SOTP valuation and apply the same multiples of 8x, 5x, 9x and 15x to each of our FY27 EBITDA forecasts for the Mobile, Fixed, Infrastructure and Amplitel businesses.
There are no changes in the key assumptions we apply in either the DCF or DDM valuations and we continue to apply an 8.9% WACC in both. The net result is a 7% increase in our TP to $5.10 which is a modest discount to the share price so we maintain our HOLD recommendation.
