Eltel delivered sales slightly above expectations at EUR 184m (3% vs ABGSCe 178m), up 1% y-o-y, whereof 0.2% organic in the Nordics. This was the first quarter since Q1’17 with sales growth. However, profitability was soft due to harsh winter-conditions, high sick-leave, and inflation. Adj. EBITA was -2.4m (vs. ABGSCe 0.3m), corresponding to a margin of -1.3% (-0.4%) vs. ABGSCe at 0.2%. The inflation is hitting all Eltel’s markets, especially the higher fuel and asphalt prices. In Finland and Poland, where Eltel has a sizeable power business, inflation is additionally seen in materials such as steel. Eltel is in dialogue with customers to seek compensation for cost increases but sees a risk of negative impact to remain for full-year ‘22e.
Estimate changes and outlook
Given the uncertainty relating to cost inflation, Eltel is no longer in position to give guidance for the operative EBITA margin and therefore remove such guidance, according to management. The previous guidance stated that the company expects full-year 2022 operative EBITA margin to increase compared to 2021 (1.8% reported in 2021, 1.5% adj. for positive one-off). ABGSCe 2.4% for ‘22e. Eltel has also extended the long-term financial targets for operative EBITA margin of 5% and leverage of 1.5-2.5x ND/EBITDA until ‘25 (previously ’23). The growth target in the Nordics from 2022 onwards remains intact. On isolated numbers, estimates come down 14%. However, expect cons. estimates to come down further given the removal of guidance.
Final thoughts
The share trades at 9x ’‘23e EV/EBITA (adj.) on our pre-report estimates, vs. Transtema and Netel at 7.3x and 7.6x, respectively. More information expected at conf call 10:00 CET. Link to webcast: www.eltelgroup.com
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