Net Insight: Successful transformation continues - ABG
Another testament to a successful transformation
NETI continued Q2’21 on the same trajectory as Q1, with both organic growth and incremental improvements in profitability. Sales of SEK 94m (+13% y-o-y FX adj.) were in line with our expectation, owing in part to continued improvement of the investment appetite in the market. Adj. EBIT of SEK 9.0m, however, exceeded our expectation by 23%. The strong EBIT was supported by a 5% y-o-y reduction in opex. In our view, the opex reduction while growing sales is a testament to the success of the strategic programme implemented by management, and strengthens our belief that NETI has turned into a profitable company after several years of underperformance. According to NETI, the programme has yielded improved commercialisation as well as a stronger value proposition. In addition, the company has become more long-term oriented and improved the way it supports and cooperates with customers. Another highlight in the quarter was that the Aperi portfolio that was acquired in early 2020 is now being offered to all NETI customers, after a year of improving and reshaping the offering.
Positive estimate revisions: ’21-23e EBIT up 1-7%
We make some marginal adjustments to sales, cutting ‘21e by 1% and increasing ’22-23e by 1%. We also cut ’21-23e opex on the back of the lower-than-expected opex in Q2’21. In terms of EBIT, we raise our ’21 forecast by 1%, 22e by 7%, and ‘23e by 4%.
21x ‘23e EV/EBIT, ’21-‘23e EBIT CAGR of 24%
In our view, NETI continues to execute well and is well positioned to continue to deliver. Underlying demand for its products is strong, with trends like remote production, IP-based workflows and demand for higher video quality driving the need for higher network capacity. H1’21 has been strong, and we think H2’21 will continue down the same path. On our new forecasts, the NETI share is trading at 21x ‘23e EV/EBIT.
https://www.introduce.se/foretag/net-insight/Equity-research/2021/7/net-insight---successful-transformation-continues/
