Alcadon: H2 looks more exciting than Q2 - ABG

Q2 report due Friday, 12 August Scale-up of organization to weigh on margins in Q2… …and notable volumes in Germany set to come in H2 Costs running ahead of volumes in Q2 as well
For Q2, we expect sales of SEK 220m, up 24% y-o-y (15% organic, 2% FX and 7% M&A). As in Q1, we expect the organic growth to be driven by the Nordic countries, whereas Germany and Benelux still lag behind. We expect to see some volumes in Germany related to the Deutsche Glasfaser and Emtelle contracts, as management previously has guided for, but not enough to offset a continued build-up in opex (mainly relating to recruitments). Consequently, we forecast a soft adj. EBIT margin in the quarter of 6.0% (9.7%), translating into adj. EBIT of SEK 13.1m. To our understanding, the volumes in Germany should pick up in H2’22, indicating a gradually increasing organic growth and margin for the group in Q3-Q4’22.

‘22e-‘24e adj. EBIT estimates down 25-11% Since the German market has not progressed as we initially expected, partly due to the pandemic (high sick leave and component shortages) but also due to slower-than-expected permit processes, we make some notable adjustments to our estimates. We lower sales by 10/7/5% for ‘22e/’23e/’24e and adj. EBIT by 25/18/11% for the same period. On our updated estimates, we forecast a ’21-’24e adj. EBIT CAGR of 20%. With its strong balance sheet (‘22e ND/EBITDA 0x) and explicit M&A agenda, acquisitions could add to our estimates. We expect Alcadon to focus its acquisition efforts on markets characterized by low fibre penetration and high expected growth (e.g., Benelux, Germany and UK). If so, an acquisition would not only contribute volumes, but also improve the organic growth profile of Alcadon.

Trading at 14x ‘23e EV/EBIT, new FVR of SEK 90-100 (90-120) The share is trading at 14x ‘23e EV/EBIT on our updated estimates. Due to our lower estimates, we cut our fair value range to SEK 90-100 (90-120), corresponding to 16-19x ‘23e EV/EBIT.

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