CelcomDigi Bhd’s core net profit rose 3% year-on-year to RM853 million for the first half of financial year 2026 (1HFY26), broadly in line with expectations, according to Kenanga Research.
The research house said the earnings represented 57% of its full-year forecast and 50% of consensus estimates.
It expects a softer second half, mainly due to CelcomDigi beginning to equity-account for Digital Nasional Bhd (DNB) from the fourth quarter of FY26.
CelcomDigi declared a second-quarter dividend of 3.4 sen per share, bringing its 1HFY26 dividend to 6.8 sen, compared with 7.5 sen in the corresponding period last year.
The reported second-quarter core net profit excluded several one-off items, including RM23 million in stamp duty charges arising from alignment with the tax regime and settlements related to provisions for doubtful debts.
Kenanga said CelcomDigi’s service revenue increased 1.6% year-on-year in 1HFY26, in line with its full-year guidance of low single-digit growth.
Growth was led by the home fibre and postpaid segments.
Home fibre benefited from a larger subscriber base as converged plans improved customer retention, while higher average revenue per user (ARPU) was supported by increased take-up of Enhanced Fibre, fixed wireless access (FWA) and converged offerings.
The postpaid business also recorded subscriber growth through disciplined customer-base management, while ARPU remained stable as the group focused on higher-quality customer acquisitions.
These gains more than offset structural declines in prepaid subscribers, as customers continued migrating to postpaid plans, as well as lower bulk SMS traffic.
CelcomDigi’s enterprise solutions segment maintained strong momentum, with revenue growing 24% year-on-year, driven by demand for cybersecurity services, expansion of its fixed customer base and growing contributions from digital solutions.
CelcomDigi’s normalised EBIT stood at RM1.5 billion, broadly flat year-on-year and below the group’s guidance for low single-digit growth.
Kenanga said the Operational Excellence (OE) programme continued to generate cost savings, although higher depreciation expenses weighed on EBIT.
Year-to-date savings under the programme reached RM141 million, supported by lower leased-line costs, procurement efficiencies and improvements in infrastructure projects.
These savings were partly offset by RM101 million in additional costs arising from higher 5G wholesale fees due to increased traffic, higher stamp duties, professional fees for active projects and increased investment in customer experience.
Despite largely flat EBIT, core net profit increased 3.4% year-on-year, helped by lower tax expenses that more than offset higher finance costs.
CelcomDigi has also raised its OE programme savings target to RM470 million from RM450 million, with RM100 million of savings recognised in the second quarter.
CelcomDigi added 25,000 postpaid subscribers in 2QFY26, extending its streak of positive quarterly additions to 13 consecutive quarters.
Meanwhile, prepaid subscribers declined by 113,000, marking the fifth consecutive quarter of contraction as customers continued shifting from prepaid to postpaid.
CelcomDigi told analysts it will begin equity accounting for DNB from 4QFY26, representing a full-quarter contribution.
Kenanga expects the impact to be relatively small, accounting for less than 5% of annual group profit after tax.
Kenanga noted that greater adoption of DNB’s 5G network would not necessarily result in a corresponding reduction in CelcomDigi’s 4G capex, as demand for 4G data continues to grow.
The house raised its FY26 earnings forecast by 5.7%, reflecting the deferral of DNB equity accounting to 4QFY26 from its previous assumption of 3QFY26.
However, its target price was trimmed to RM3.28 from RM3.35, following a rollover of its valuation base year to FY27, based on an unchanged 9.0 times forward EV/EBITDA multiple.
Kenanga maintained its OUTPERFORM recommendation.
The research house remains positive on CelcomDigi, citing structural cost efficiencies from the merger, with the OE programme expected to deliver significant savings, as well as an estimated 7%-10% average free cash flow yield for FY26F-FY27F, which supports dividend payouts.
It also highlighted CelcomDigi’s leading market position, with a subscriber base about 30% larger than its closest competitor, giving the group greater economies of scale and better ability to absorb fixed and network-related costs.
Key risks include slower-than-expected realisation of merger synergies and OE savings, greater earnings dilution from the privatisation of Malaysia’s first 5G network and lower cash balances resulting from substantial and recurring capital calls for DNB.
