Alcadon: EBIT up 31% in 2022e from German contract - ABG

Alcadon signs landmark agreement in Germany
Adds 31-28% on ’22-‘23e EBIT
Implied ‘22e EV/EBIT of ~6x (9.3x before contract)

Alcadon has signed a landmark deal in Germany, bolstering its sales by ~25% and EBIT by ~31% in 2022. The deal is a 3 + 1 year contract for the delivery of fiber optic material within the FTTH (Fiber-To-The-Home) rollout with Deutsche Glasfaser (DG). It includes deliveries to all subcontractors to DG for the rollout of the FTTH network. Deliveries are expected to begin in December ‘21. The estimated value of the contract is SEK 200m per year. DG intends to roll out fiber to six million German homes over the next ten years, and we estimate that this will require spending of roughly SEK 100bn. The relevant material costs for Alcadon should amount to ~SEK 20bn (SEK 2bn per year), hence, we see potential for significantly higher volumes from DG contracts. Notably, this contract should be a result of the framework agreement Alcadon has with the EQT companies, which includes several companies, besides DG, within the FFTH/FFTX industry. We estimate that the total potential of the framework agreement amounts to > SEK 5bn in annual sales.

The 31% addition to ‘22e EBIT implies a ‘22e EV/EBIT of 6x (down from 9.3x before contract), ~30% below its 3-year average. We see no reason for Alcadon to be trading at a lower multiple post contract, given the improved exposure to Germany and cementing its role as a solid partner in Germany.

Länk till analysen i sin helhet: https://www.introduce.se/foretag/alcadon/Equity-research/2021/8/alcadon---ebit-up-31-in-2022e-from-german-contract/