Telstra Group Ltd (ASX: TLS) shares could undoubtedly benefit from the ASX telco share's projected profit growth in the coming years.
Telstra announced last week that it would increase the price of its postpaid and prepaid mobile plans by between $2 and $4 per month. The company said network traffic was growing at 20% per year, and it needed to continue to invest to provide "additional capacity to support more data, faster speeds, and a more consistent experience for customers."
Not only should the price hike help short-term revenue and earnings, but the broker UBS thinks the telco industry could continue to see industry mobile average revenue per user (ARPU) keep rising.
The broker's research suggests overall consumer churn could remain stable and low and "likely confined to [the] more price-sensitive end of the market".
UBS thinks investors are "not pricing in the ability for the industry to capture the majority of price rises recently announced, and are expecting a level of down-trading of plans by consumers".
Let's examine the projected profit Telstra will generate in the coming years following the news of these price increases.
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FY24 projection
These recently announced price increases won't be implemented until FY25, but FY24 is benefiting from previous price rises that were linked to inflation.
UBS is projecting in FY24 that Telstra could generate revenue of $23.66 billion, earnings before interest and tax (EBIT) of $3.66 billion and $2.05 billion of net profit after tax (NPAT).
The profit growth is projected to be approximately 6% compared to FY23, and the Telstra dividend per share is forecast to be 18 cents.
How about FY25?
Earnings growth is expected again in FY25 despite the ongoing investment in its 5G network and other telco infrastructure.
UBS suggests that in FY25, Telstra could generate $24.1 billion of revenue, $3.7 billion of EBIT, and $2.06 billion of NPAT.
If those projections are true, the NPAT would grow by around 1%, and the dividend could rise to 19 cents per share, according to UBS.
And FY26?
Profit is expected to start accelerating in FY26, which is a financial year that could really excite investors.
Owners of Telstra shares could see their business generate $24.7 billion in revenue, $4.47 billion in EBIT, and $2.54 billion in NPAT.
That'd be a jump of almost $500 million in NPAT in dollar terms. In percentage terms, the FY26 net profit is forecast to rise by 23%. This large profit growth could lead to a jump in the dividend per share to 21 cents.
Expectations for FY27
Ongoing double-digit profit growth is expected in FY27, which could be welcome news for Telstra shareholders.
The company could generate $25.4 billion in revenue, $5 billion in EBIT, and $2.87 billion in NPAT, according to UBS.
This could mean a 13% increase in net profit in percentage terms, which could fund a large bump in the dividend per share to 24 cents.
Finally, here's the FY28 forecast
The last year of this series of projections is also forecast to be a good one for owners of Telstra shares.
UBS predicts that in FY28, the ASX telco share could generate $26.1 billion in revenue, $5.4 billion in EBIT, and $3.18 billion in net profit.
In percentage terms, this could represent a 10.75% year-over-year increase and might help fund a dividend payment of 26 cents per share.
If these projections come true, NPAT could grow by $1.1 billion over the next four years, leading to an 8 cents per share increase in the dividend between FY24 and FY28, which is an exciting prospect for Telstra shareholders.
