Eltel - FY'22 operative EBITA likely negative - ABG

FY'22 oper. EBITA likely negative, implies EUR -2.2m in Q4
Eltel announced a profit warning recently, where the company states that operative EBITA is expected to be negative for Q4, which also risks a negative FY EBITA. A negative FY EBITA implies a loss of at least EUR -2.2m in Q4 (ABGSCe 3.9m). According to the company, there is some slowing purchasing activity among customers leading to lower sales, but the main issue seems to be increased costs. While price indexation effects should come in to play on many contracts around year-end, the earnings effect will likely lag roughly one quarter since the installations carried out in Q1 will be mainly products ordered in Q4. As such, we expect continued struggles into the beginning of 2023 as well.

Looking to cut costs to adapt to lower activity
In the press release, Eltel states it is looking to adjust the organisation to the current situation, which we believe means a reduction in the workforce. The company does not disclose how much the cost base can be slimmed down, but as with price increases we expect roughly one quarter lag on this as well, since Nordic countries tend to have a standard 3-month notice period on employee agreements.

Trading at 14-10x '23e-'24e EV/EBITA on current estimates
On our current estimates, the share is trading at 14-10x '23e-'24e EV/EBITA. Our estimates include a margin improvement to 1.9% in '23e, followed by 2.5% in '24e, putting it notably below the company's YE'25 target of reaching 5%.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/eltel/Equity-research/2022/12/eltel---fy22-operative-ebita-likely-negative/