Eltel delivered better-than-expected sales of EUR 226m, 8% vs. ABGSCe and down 1% y-o-y, whereof -3% was organic. The sales beat was primarily driven by the Sweden segment, which saw 9% organic growth in Q4 (ABGSCe -14%). The high organic growth is explained by newly started smart metering projects and growth in the Communication business area. Additionally, sales remained roughly on last year’s level, indicating that Eltel has reached its new baseline for growth in the Nordics, according to management. Operative EBITA was EUR 7m, however, including a positive NRI of EUR 2.5m due to a real estate sale in Poland. As such, adj. EBITA was EUR 4.5m (-1% vs. ABGSCe), for an adj. EBITA margin of 2.0% (1.7%) vs. ABGSCe at 2.2%.
Management expects contiued margin improvements in ‘22e
We raise our ‘22e-‘23e sales and adj. EBITA estimates by 2% due to the estimate beat. We believe that 2021 concludes Eltel’s turnaround; in future, profitable growth will be the main objective, with the firm targeting 2-4% growth p.a. in the Nordics (vs. ABGSCe at 2% for ‘22e-‘24e, respectively). Notably, Eltel has signed four major contracts during the last months, supporting the growth target. Lastly, management expects the full-year ’22 operative EBITA margin (ABGSCe 2.4%) to increase vs. 2021 (1.8%). However, management notes high sick leave (7-8% vs. 3-4% normally) and a cold winter in the Nordics, with deep frost impacting ground works such as fibre and enforcing the typical seasonality in its business, thereby negatively affecting Q1’22e.
12x ‘23e EV/EBITA
The share is trading at 12x ‘23e EV/EBITA, ~50% above closest peers Transtema and Netel at 8x ‘23e EV/EBITA. Looking ahead, we estimate a ’21-‘24e adj. EBITA CAGR of 34%. We decrease our fair value range to SEK 10-18 (15-26) on lower peer multiplies.
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