Bredband2's recent efforts to improve customer acquisition bore fruit in Q2 (+2.6k q-o-q vs. ABGSCe +1.0k), while ARPU improved well due to recent price increases. We estimate organic growth of +6% y-o-y, 2% above our forecast. Together with good cost control, EBITA was +1% vs. ABGSCe and grew 27% y-o-y, albeit partly driven by the acquisition of Stockholm Stadsnät, which was consolidated on 1 February. The gross margin of 33.6% (vs. 34.0% in Q1) was slightly below our estimate of 34.1% - probably partly due to higher prices from the network owners - and we expect more pressure in Q3, as Bredband2 is looking to increase its marketing activities, as suggested by our price tracker for July. However, increased marketing activity usually leads to improved customer uptake, while we expect gross margins to gradually normalise in Q4 and 2025 as a result of price increases.
Positive estimate revisions for '25e-'26e
The better-than-expected customer intake and ARPU lead us to raise '24e-'26e sales by 2-1%. Although we cut '24e EBITA by 1% due to lower near-term gross margin assumptions, the higher sales lift '25e-'26e EBITA by 3%.
We expect more price increases
Although CPIs - a driver of price increases - are slowing, we expect Bredband2's prices to continue to rise due to 1) a maturing market and 2) the fact that it offers a lower price point than several of its competitors. Due to its scalable business model, we expect a 17% EBITA CAGR in '23e-'26e. Gearing of -0.7x lease adj. ND/EBITDA provides solid firepower for more M&A, and the share is trading at 10x f12m EV/EBITA (vs. the 5Y avg. of 12x).
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