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Q1 report due on Wednesday, 4 May We expect a challenging quarter… …and margin improvements tilted to H2 Q1 expectations: A challenging quarter We see several challenges for Eltel in Q1’22, thus limiting the ongoing margin improvement. First, we expect cost inflation in terms of 1) gasoline and diesel prices – Eltel has some 2,800 cars on the roads, 2) material prices, mainly impacting business area Power in Finland (23% of ’21 sales), and 3) salary increases. Eltel conducts a large share of its business through multi-year framework agreements with fixed prices, leaving little room for price increases to offset cost inflation. Furthermore, the Polish High Voltage business will be negatively affected by cost inflation (steel) and component shortages. Additionally, Eltel normally uses a lot of subcontractors from Ukraine in Poland, but due to the Russian invasion of Ukraine there is currently a shortage of staff. On top of all this, the sick-leave level has been twice the normal rate, at 7-8%, due to Omicron for parts of the quarter, and a cold winter in the Nordics, with deep frost impacting ground works such as fibre and reinforcing the typical seasonality in its business, thereby negatively affecting Q1’22e. All in all, we expect sales of EUR 178m, down 2% y-o-y, and adj. EBITA of EUR 0.3m, corresponding to an adj. EBITA margin of 0.2% (-0.4%). Estimates relatively intact We leave our estimates relatively unchanged. We raise sales by 1% for ’22e-’24e on updated FX assumptions, but leave ’22e-’24e adj. EBITA unchanged due to slighly lower margin expectations. Despite the challenges in Q1’22e, we expect the adj. EBITA margin to improve from 1.5% in ’21 to 2.4% in ‘22e, with most of the improvement in H2’22e, driving adj. EBITA growth of 59% in ’22e and a ’21-’24e adj. EBITA CAGR of 34%. 12x ’23e EV/EBITA The share is down 19% YTD and is trading at ~12x ‘23e EV/EBITA, 13% below our wider peer group but ~60% above closest peers Netel and Transtema at ~7x ’23e EV/EBITA. Läs mer på Introduce
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