Eltel: No escape from cost inflation - ABG

Adj. EBITA 84% below ABGSCe ‘22e adj. EBITA est down 20% on isolated numbers Trading at 19-10x ’22e-‘24e EV/EBITA Q2 results

Sales were EUR 209m (-3% vs ABGSCe 216m), -1% y-o-y whereof -2.4% organic in the Nordics. Volumes were affected by a delayed start of the groundwork season due to a long winter, and a six-week strike among information and communication technology personnel in Finland. On the positive side, organic growth in Sweden and Norway were 14% and 10%, respectively. Adj. EBITA was EUR 0.5m (-84%vs ABGSCe 3.1m), corresponding to an adj. EBITA margin of 0.2% (2.1%) vs. ABGSC 1.4%. The main reasons for the decrease in profitability was the increase in fuel and material prices. Eltel has been in discussions with customers and says it has secured agreements with most of its customers to recover parts of the cost increases, although full recovery will not be possible.

Estimate changes and outlook On isolated numbers, our ‘22e adj. EBITA estimate is down 20% on the estimates miss. Management highlights strong end markets (e.g., fiber and 5G), but concludes that there are still uncertainties in the market regarding the geopolitical situation and the cost increases, which will continue to affect Eltel.

Final thoughts The share is down 42% YTD and trades at 19-10x ‘22e-‘24e EV/EBITA. Management will host a conference call at 10:00 CEST. Link: www.eltelgroup.com.

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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/eltel/Equity-research/2022/7/eltel---no-escape-from-cost-inflation/