According to the results of the first half of 2023,

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Rostelecom, a provider of digital services and solutions in Russia, announced its results for the second quarter and six months of 2023, based on consolidated financial statements in accordance with International Financial Reporting Standards (IFRS).

the operator's revenue in the italy whatsapp resource mobile communications segment increased by 13% compared to the same period in 2022, from 100.8 billion to 113.5 billion rubles. The company also increased its profit for the first half of 2023 in the fixed-line Internet and digital services sectors by 6% to 51 billion and by 49% to 59.5 billion rubles, respectively.
A significant increase in revenue in the digital services sector is due to the promotion of cloud solutions - information security services, Digital Region projects, and the development of platform solutions for providing services. As for mobile communications and fixed-line Internet, the operator explained such results by an increase in the consumption of mobile network services and basic voice services and due to an increase in the number of clients connected via optical access networks.

Leonid Delitsyn, an analyst at the financial group Finam, notes that the stock market reacted positively to Rostelecom's results: ordinary shares rose in price by 3.8% to 78.4 rubles. "The very fact of publishing financial indicators is an important event, since the company had previously refrained from doing so. A 20% increase in revenue for the first half of the year compared to the result for the same period in 2021 means that the company is really benefiting from the state import substitution policy. Our forecast for Rostelecom's revenue by the end of 2023 is 652 billion rubles; net profit is 31 billion rubles," Leonid Delitsyn concluded.

Leading analyst at Freedom Finance Global broker Natalia Milchakova said that Rostelecom demonstrated strong financial results for the first half of 2023, and first of all, the company's net profit for this period grew by 24% year-on-year to RUB 27.76 billion. "The company received almost half of its revenue from digital services, primarily from cloud services, as well as from the development of mobile business and VPN services. Today, Rostelecom is a modern company that provides a set of digital services no worse in quality than similar services of non-governmental or foreign telecom operators," added Natalia Milchakova. She also noted that a positive aspect is the fact that the company reduced its debt burden in the first half of 2023, the ratio of net debt to OIBDA (operating income before depreciation and amortization) for the first six months of 2023 decreased from 3.1 in the same period last year to 2.7, and this is a normal indicator for large corporations, and even a small one for the IT sector and the communication services sector. "The company can borrow on the domestic market to develop new projects without much risk of becoming over-indebted. However, capital investments decreased in the first half of 2023, but this did not affect net profit, but free cash flow, which increased fivefold compared to the same period in 2022. Capital investments are made from retained net profit or financed by borrowed funds. Therefore, the reduction in capital investments has nothing to do with the growth of net profit," Natalia Milchakova assured.

Artem Tuzov, Director of the Corporate Finance Department at the investment company IVA Partners, assessed Rostelecom's results as positive, and he is especially pleased with the growth of free cash flow to RUB 73 billion based on the results of the first half of 2023. "Historically, this company has paid dividends in the amount of 50 to 70% of FCF (free cash flow). If the trend continues, this allows us to expect an increase in dividend payments from RUB 4.56-5 per share to RUB 7-8 per share. The issuer is also capable of paying dividends from retained earnings for 2022, when it did not pay dividends to shareholders," said Artem Tuzov.

Also, in his opinion, based on data on revenue growth from the digital, mobile segments, the Wink video service and the information security business, one can expect revenue growth in the second half of 2023, but this cannot be said about net profit: historically, Rostelecom's net profit in the second half of the year is worse than in the first.

Leading analyst of the investment company Veles Capital Artem Mikhaylin said: "We assess Rostelecom's results positively. The company demonstrated significant growth in operational and financial indicators both compared to last year and the comparable period of 2021. The operator did not disclose the results for 1.5 years and now we can say that the business was fully functioning and developing during this period. We expect that the company's financial and operational indicators will continue to grow in the second half of the year. We also expect stabilization of free cash flow, in accordance with the management's comments."