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Alcadon: Preparing for growth - ABG

EBIT of SEK 17m, -9% vs. ABGSCe on higher opex
‘22e-‘23e EBIT up 32% on more German fiber
Fair value up to SEK 45-90/share (30-70)

Alcadon delivered sales in line with our estimates at SEK 177m (0% vs. ABGSCe 178m), up 35% y-o-y, with organic sales down 8%, according to our estimates. Organic growth was weighted by component shortages and supply-chain disruptions, primarily in Sweden in early Q2. On the other hand, Alcadon saw strong momentum both within fibre-to-the-home (FTTH) and fibre-to-the-antenna (FTTA) during the quarter. Profitability was at the low end, with EBIT of SEK 17m (-9% vs. ABGSCe 19m), corresponding to an EBIT margin of 9.7% (13.4%) vs. ABGSCe 10.7%. It was mainly an effect of higher opex than we expected from hiring more personnel to support the growth agenda, mainly in Germany.

Alcadon is trading at 8x ‘22e EV/EBIT, down from 9.3x before the German contract and 20% below its 3-year average, while offering 9-11% ’22e-‘23e free cash flow yield. We note the contract gives improved exposure to Germany and cements its role as a solid partner in Germany. In addition, we estimate a ‘21e cash/sales ratio of ~7% and a ‘21e net debt/EBITDA of 1.0x. Thereby, we believe Alcadon is poised to continue growing through additional acquisitions, mainly in Germany, which would add to our estimates.
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