Alcadon delivered a Q1 report slightly above expectations, with organic growth of 15%, driven by Sweden (+19% y-o-y) and Denmark (24%). Sweden has been a challenging and declining market since the FTTH peak in ‘17, and this was the first quarter with organic growth since ’17. Thus, we see it as highly positive that Alcadon has managed to turn this trend and that growth initiatives are starting to generate volumes. The gross margin held up fairly well at 28.3% (28.9%) despite cost inflation, a testament to Alcadon’s ability to pass on increasing costs to customers. Given Alcadon’s intentional and previously communicated increase of opex (investing in growth initiatives), adj. EBIT margins decreased by 2.8pp y-o-y. However, the margin should have troughed in the quarter and improve ahead when planned opex is converted into increased volumes, according to management. Cash flow was soft at SEK 6m (20m) due to increasing NWC; here, too, we expect to see a gradual improvement during the year.
Three things to get excited about in ‘22e
Our estimates are relatively intact given a report and guidance in line with our expectations. For the remainder of ’22 and onward, we see encouraging signs in three areas: 1) Start of deliveries on two major German contracts (Deutsche Glasfaser and Emtelle) with a combined annual order value of ~SEK 240m. Both were planned to begin in H2’21, but were delayed due to COVID. However, deliveries have commenced on a small scale and will gradually be ramped up ahead, according to management. This de-risks our estimates and will be a main driver of organic growth for the group at ~45-50% in H2’22e. 2) An improved operating margin, as described above, and 3) the possibility of further M&A, providing upside to our estimates. According to management, Alcadon has several interesting discussions ongoing with potential ...
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