* Adj. EBITA up 21% y-o-y and 9% above ABGSCe despite weak sales
* We cut ’26e/'27e/’28e adj. EBITA estimates by 2%/3%/5%
* Share trading at 14x/11x ’26e/’27e adj. EV/EBITA
Stronger margins but growth remains elusive
Eltel reported Q3 sales of EUR 196m, -6% y-o-y and -11% vs. ABGSCe, with organic growth of -6.6%. Lower fibre deployment volumes and reduced contributions from larger projects weighed on sales. Despite this, adj. EBITA rose 21%, to EUR 11.0m, 9% above ABGSCe, with a margin of 5.6% (4.3%). Finland and lower group costs drove the beat, while the other segments missed our estimates. Finland’s margin reached 10.4%, supported by operational efficiency, while Denmark & Germany remained weak amid grid constraints and lower Communication activity. The order book rose to EUR 1.7bn (1.2bn), although new contracts will ramp up from Q1’27, with the full sales effect expected in Q3’27.
Adj. EBITA estimates down 2% to 5% despite the beat
We lower ’26e/'27e/’28e sales by 6%/5%/5% and adj. EBITA by 2%/3%/5%. The ’26e reduction mainly reflects weaker expectations for Denmark & Germany and Norway, and lower Finnish fibre volumes, partly offset by lower group costs. For ’27e-’28e, lower sales outweigh stronger margin assumptions in Finland. We retain EUR 20m/35m of incremental Telenor sales in ’27e/’28e, while Vattenfall remains embedded in our Swedish forecasts. We forecast group margins of 3.5%/4.2%/4.6% vs. the 5% target.
Trading at 14x/11x adj. EV/EBITA for ’26e/’27e
At the current share price of SEK 16.5, Eltel is trading at 14x/11x ’26e/’27e adj. EV/EBITA. We forecast a 22% adj. EBITA CAGR in ’26e-’28e, supported by margin improvements and contract-driven growth. The model implies net debt excluding leases/EBITDA of 1.8x at YE'26, declining to 1.3x in '27. This should gradually improve the dividend capacity, although Q3 operating cash flow of EUR 0.5m highlights the need for stronger cash conversion. With new contracts still to ramp up, delivery and deleveraging remain central for progress.