Alcadon delivered Q2 sales in line with our estimates, with a clear slowdown in the Nordics, partly due to lower structured cabling demand due to the current weak construction market, while Germany and Benelux outperformed our expectations. Adj. EBITA, however, came in 8% lower than expected, mainly as a result of a weak SEK hurting the gross margin, since COGS are largely denominated in USD and EUR. Meanwhile, continued NWC build-up made for soft FCF, and gearing therefore remains high on near-term estimates (3.7x '23e ND/EBITDA excl. leasing and incl. earn-outs).
FX raises top line, but lower GM leads to -3% on adj. EBITA
We lower adj. EBITA by 3% for '23e-'25e (reported EBITA -12% for '23e), despite higher top-line assumptions, which are mostly FX driven and thus are offset by a lower gross margin, as explained above. At segment level, we downgrade our estimates for Denmark, where the company has previously flagged that a few major fibre-to-the-home (FTTH) customers are slowing their rollout, while we upgrade our estimates for Benelux, a fairly new region for Alcadon where the ramp-up in sales has exceeded our expectations.
Company cautious near-term, expects improvements by YE'23
The market in 2023 so far has been tough, with headwinds in structured cabling and certain FTTH customers ordering less, although the data centre vertical is continuing to perform. All in all, Alcadon expressed caution regarding the near-term demand outlook, saying it expects improvements to be seen by year-end, followed by a strong 2024. We have estimated a '23e-'25e adj. EBITA CAGR of 19%, and the share is currently trading at 12x '23e EV/EBITA (adj.).
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