Eltel announced yesterday that it has signed the framework agreement with Vattenfall Eldistribution for the service and maintenance of the electricity network in the Roslagen and Uppland areas, now that the appeals process has concluded. The scope and value are unchanged from the June award: ~138 MEUR over the initial four-year period (~34 MEUR per year, ~4% of group revenue), rising to ~275 MEUR including four option years. Work starts in June 2027. Because the award had been appealed, we had kept the agreement out of our estimates. With the contract now signed, we add it to our forecasts and add the KONSTANT framework agreement in Denmark (73 MEUR over five years, starting in February 2027). Together with a higher Q4'26 estimate, this mainly lifts our outer-year estimates, raising 2028e EBIT by 7%. Following this, we now see an attractive risk/reward again. We therefore upgrade our recommendation to Accumulate (was Reduce) and raise our target price to SEK 18.5 (was SEK 15.4).

Growing contract base strengthens the investment case

In our view, Eltel's investment case rests on continuing its profitability turnaround toward the 5% adjusted EBITA target. This is supported by structurally rising demand for power grid construction and maintenance as the Nordics electrify and reinforce their networks. Having delivered twelve consecutive quarters of year-on-year margin improvement, we believe Eltel is structurally better positioned than in the past. It has a healthier contract structure with broad indexation protection, a gradual business-mix shift toward higher-margin Emerging services, and a more balanced capital structure. The margin trajectory remains the key positive driver, but the burden of proof is still on Eltel to show that the 5% target can be reached on its stated timeline, and execution is the main risk. A steady inflow of multi-year framework agreements (Telenor, Vattenfall, KONSTANT, Caruna, E.ON, Elisa) clearly improves visibility into the revenue base beyond 2027.

New contracts lift mainly 2028 estimates

At full run-rate, we estimate that the Vattenfall (~34 MEUR) and KONSTANT (~15 MEUR) agreements together add roughly 49 MEUR of annual revenue, or ~5% to our 2028e group revenue. Both are framework agreements, so the volumes are customer estimates rather than guarantees. We have therefore modeled slightly lower volumes and a ramp-up during 2027, as Vattenfall starts in June and KONSTANT in February. As a result, we raise our 2027e and 2028e revenue by 2% and 4%, respectively. We expect mobilization costs, such as recruiting new employees, ~40 new technicians in Denmark, and setting up local subcontractor partnerships, to absorb much of the short-term earnings uplift in 2027. Our 2027e EBIT therefore rises by only 1%, while the uplift becomes visible in 2028e (EBIT +7%, EPS +10%). We also raised our Q4'26 estimates, which we viewed as too conservative given the strong order backlog (Q2'26: 576 MEUR, +17% y/y), lifting our 2026e revenue and EBIT by around 1%. We now expect an adjusted EBIT margin of 3.6% in 2026, 4.0% in 2027 and 4.5% in 2028.

Risk/reward has turned positive again

Based on our updated estimates, Eltel's 2026 valuation (EV/EBITDA ~7x, EV/EBIT ~13x, P/E ~21x) is still above our acceptable ranges (EV/EBITDA 5-7x, EV/EBIT 8-11x, P/E 9-13x), and the 2027 multiples (~6x, ~11x and ~13x) sit at their upper end. As 2026 draws to a close and the new contracts mainly lift 2028, we are giving 2028 more weight in our assessment. On 2028e figures, the valuation looks attractive (EV/EBITDA ~5x, EV/EBIT ~8x, P/E ~10x), at the low end of or below our acceptable ranges. Our DCF model, where we have also raised the terminal EBIT margin to 3.0% (was 2.8%) given the improved contract base and our increased confidence in Eltel’s margin trajectory, indicates a value of SEK 18.5 per share, in line with our new target price. The case still depends on Eltel continuing to improve its margins, but should the company reach its 5% target, our estimates (2028e adj. EBITA: 4.5%) would leave further upside.