Source: Inderes

Eltel will publish its Q3 report on Thursday, 29 Oct. We expect the company to report modest top-line growth and a continued year-on-year improvement in its adjusted EBITA margin. The quarter was highlighted by very strong momentum in signed awards and contracts, which we view as de-risking the revenue trajectory in the coming years. We will focus on margin progression, management commentary on mobilizing recent major contract wins, and the broader market outlook.

Modest top-line growth supported by the Power segment and strong contract momentum

We forecast Q3 revenue of 212 MEUR (Q3'25: 208 MEUR), corresponding to a 1.9% year-on-year increase. We expect growth to be supported by the Power business in Finland and Sweden, driven by grid reinforcements and Emerging services such as data center projects. While we forecast Norway to grow 3% y/y, the ~8% appreciation of the NOK against the EUR also provides a currency tailwind to reported revenue, creating upside risk to our estimates. Furthermore, we estimate the Denmark & Germany segment to face a year-on-year decline (-5%) due to timing uncertainties and grid connection bottlenecks delaying some renewable energy projects in Denmark.

A key highlight of the quarter was the very strong momentum in signed awards and contracts, including the landmark 475 MEUR Telenor agreement in Norway and the 73 MEUR KONSTANT frame agreement in Denmark. While these major wins will primarily phase in from 2027, they significantly strengthen the order book, secure the existing Norwegian revenue base, add new Danish Power volumes, and provide strong revenue visibility. As both major wins are volume-based frame agreements, they will mainly be reflected in the total order book, whereas the committed order backlog only builds as purchase orders are received. That said, the committed order backlog was already strong at 576 MEUR at the end of Q2 (+17% y/y), which supports near-term visibility. In addition, the Vattenfall Eldistribution agreement (~138 MEUR for the initial four-year period, starting in June 2027) was signed in October after the appeals process concluded and thus falls into the Q4 order book. We added both the KONSTANT and Vattenfall agreements to our estimates in our latest company report (14 Oct), which mainly lifted our 2028 estimates.

Margins expected to continue their upward trajectory

On profitability, we estimate Q3 adjusted EBITA of 11.4 MEUR, translating to a 5.4% margin (Q3'25: 9.1 MEUR, 4.3%). Meeting our estimate would mark the thirteenth consecutive quarter of year-on-year adjusted EBITA margin improvement, underlining the ongoing operational turnaround. The margin expansion is driven by a healthier contract structure with indexation protection, improved operational efficiency, and a gradual business-mix shift toward higher-margin Emerging services. The profitability improvement is expected to be broad-based, with particularly strong year-on-year progress anticipated in Sweden and Norway. As in Q2, we believe the prolonged Iran/US conflict may have kept certain input costs (e.g., fuel and asphalt) slightly elevated, but given the broad indexation protection in Eltel's contracts, we do not expect this to derail the margin trajectory. While the underlying margin trajectory should remain firm, we anticipate that mobilization and start-up costs for the recently signed large contracts will absorb much of the earnings benefit in 2027, with the impact becoming more visible in 2028 (2028e EBITA margin: 4.5%).

Focus on margin progression and mobilization of new contracts

Eltel does not provide short-term financial guidance. Our focus in the Q3 report will be on management's qualitative market outlook and commentary regarding the path to its 5% adjusted EBITA margin target. Given the very strong momentum in signed awards, we will look for details on the mobilization phases of the Telenor, KONSTANT, and Vattenfall contracts, particularly regarding recruitment, fleet set-up, and the expected near-term margin impact of these start-up costs. Furthermore, we will monitor the sustainability of the turnaround in Norway and any early signs of easing in the grid connection bottlenecks in Denmark. We will also listen for commentary on any knock-on effects from the still-ongoing Iran/US conflict on input costs, supply chains, and the broader market outlook. Finally, the company's progress on working capital management and deleveraging toward its 1.5-2.5x net debt to adjusted EBITDA target range remains a key watchpoint, as this ratio stood at 3.1x at the end of Q2.