Bredband2: More margin expansion in Q4e - ABG

Improved org. growth on price increases
'23e EBITA +3%, '24e-'25e largely unchanged
11x-9x '23e-'24e EV/EBITA, 8-10% lease adj. FCF yields


Better gross margin, but weaker customer intake

Bredband2 continues to reap the rewards from increased prices. Sales of SEK 401m grew 2% q-o-q and 5% y-o-y, driven by a higher ARPU as the customer base was down 2% y-o-y on recent churn due to the price hikes. This was a solid outcome (sales were in line with ABGSCe), but the sequential customer intake of -2,800 was weaker than expected. Here, we also note that its key peer Bahnhof reported a Q3 net customer intake below its historical levels, which we believe was partly explained by a maturing market. We expect the customer intake to remain muted in Q4, but improve in 2024 as our price tracker suggests that Bredband2 has recently lowered its prices. On gross margins, the Q3 metric of 34.5% expanded from 33.7% in Q2 on the back of the higher sales. With opex down 6% y-o-y, this led to EBITA +5% vs. ABGSCe and +28% y-o-y for a margin of 10.3% (vs. 8.4% in Q3'23). We expect opex to stay low in the coming quarters and therefore estimate the recent positive margin trajectory to continue.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/bredband2/Equity-research/2023/11/bredband2---more-margin-expansion-in-q4e/