Eltel "Profitable partner for future infrastructure"

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The company or industry is not very familiar to me, but I learned more about the company in various ways. :slight_smile:

Briefly:

Eltel is a provider of technical services in the energy and communication sectors. The main focus is on the repair and development of transmission systems, infrastructure, and networks. Business is conducted globally in most business areas. The largest operations are in the Nordic countries. The company was founded in 2004 when Swedia Networks and Eltel Networks merged. The head office is located in Stockholm.

More general information and an investor’s perspective

Eltel is a leading service provider for critical energy and communication infrastructures in the Nordic countries. The company has long struggled with its profitability, and its current strategy focuses on building sustainable profitable growth. Eltel has moved in the right direction, but confirming and realizing the turnaround may take time. Inderes expects the company to gradually improve its profitability in the coming years.

Eltel’s key services include the maintenance, upgrading, and project work of electricity grids for national transmission system operators and distribution network owners, as well as communication network maintenance services. The company’s main markets are “highly competitive,” which has led to the commoditization of traditional businesses. Eltel has therefore developed its service offerings and pricing models to create a more individualized business model and aims to expand its customer base into new areas, such as green energy. In addition, Eltel operates in Germany, Lithuania, and currently Poland, but has announced its intention to sell its Polish business, with the transaction expected to be completed during Q2’24.

At least Inderes expects Eltel to improve its margins through strategic initiatives in the coming years. The company’s history has been challenging, with recent years’ challenges such as inflation and delayed customer investments burdening profitability. Eltel’s strategies appear sound, but as noted, the realization of the turnaround will take time.

Organic growth is expected to be in low single digits in the coming years, but more is expected from profitability. Expectations and the turnaround are partly priced into the stock, so the stock may not necessarily be considered cheap.

Conveniently, the Q2 results were released, so let’s put the information here:

More information about Q2 here.

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Inderesin kahvihuone (Osa 9)
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Eltel published its second-quarter report, which showed that the company has moved in the right direction. CEO Håkan Dahlström summarizes the report’s content and discusses the demand situation as well as Eltel’s future plans for its other businesses.

Inderes’ Jesper Hagman interviewed the CEO.

Topics:

00:00 Start 00:14 Q2 key takeaways 00:49 Demand situation 01:57 Norway situation 02:48 Power and Communication 03:05 Broadening of the customer base 03:35 Plans for the rest of the Other businesses

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@Aapeli_Pursimo on tehnyt yhtiöraportin englanniksi Eltelistä. :slight_smile:

The company’s growth slightly exceeded our estimates, whereas its operating result increased from the comparison period, but fell short of our expectations. Thus, the company’s development was a step in the right direction, but somewhat slower than we expected. We made only small estimate revisions after that report, and we still expect the company’s profitability to increase gradually in the coming years. However, we see this to be largely priced at the current stock price and view the expected risk-adjusted return to be inadequate for the next 12 months.

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Eltel released its Q3 results today. CEO Håkan Dahlström was interviewed by @jesper.hagman.

The interview is in English. :slight_smile:

Eltel released the Q3 report today and while the adjusted EBITDA was impressive, there’s still significant work ahead to maintain and build on these improvements. Eltel´s CEO Håkan Dahlström summarizes the third quarter, elaborates regarding the demand and outlook situation and why they removed the timeframe of their financial targets.

Topics:

00:00 Introduction
00:18 Q3 key takeaways
00:41 Norway situation
01:34 Finland & Sweden
02:23 Demand & outlook
03:49 Competition
04:09 Renewable energy’s outlook
04:38 Strategy execution
05:25 Removed timeframe for financial targets

This video can also be found on the Inderes Nordic channel, here:

https://www.youtube.com/@inderesnordic

Here is a link to the Q3 report itself:

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Above is yesterday’s CEO interview and below is the fresh company report after the results, in Aapeli’s style. :slight_smile:

We reiterate our Reduce recommendation and SEK 7.20 target price for Eltel. The company’s Q3 report was well in line with our expectations and reflects the continued gradual improvement of the company. We made only minor estimate revisions at Group level after the report, and we expect the company’s profitability turnaround to continue in the coming years. However, we see this as priced in at the current stock price and thus the expected risk-adjusted return as weak for the next 12 months.

Quoted from the report:

However, if the development continues on the path we expect, we believe there might be some upside in the 2026 multiples (EV/EBITDA 4x, EV/EBIT 9x, P/E 10x) with the profitability improvement remaining intact. Given Eltel’s volatile track record, however, it is hard to rely too much on this, due to the still uncertain profitability improvement. Hence, we believe that the current share price already reflects a profitability turnaround. Thus, we see the stock’s main return driver to be a faster and stronger profitability turnaround than our current expectations.

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@Sara_Antonacci ja @Aapeli_Pursimo keskustelivat Eltelistä ja mm. sen Q3:sta. :slight_smile:

The report was in line with our expectations. We expect the profitability turnaround to continue in the coming years, but this is priced in at the current stock price and the expected risk-adjusted return is weak for the next 12 months. Analyst Aapeli Pursimo summarizes.

Video löytyy tietysti Inderes Nordic-kanavalta, laitathan tilaukseen, kiitos. :slight_smile:

Content:

00:00 Intro
00:07 Profitability
00:45 Organic growth
01:16 Finland and Sweden
02:25 Denmark
02:54 Norway
03:56 Which country is the most potential and most concerning considering Eltel’s business?
04:45 Financial targets
05:41 Valuation and recommendation

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Eltel continues with Telia in Finland with a three-year agreement, valued at approximately EUR 70 million. The agreement covers the construction, maintenance, fault repairs, and customer deliveries of fixed and mobile networks. The new agreement starts on April 1, 2025, and includes an option for an additional year.

Here are Aapeli’s comments on the matter. :slight_smile:

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Eltel will build the 129 MWp Hallanvahti solar power plant in Joroinen for Taaleri Energia. The 74 million euro contract covers construction, grid connection, and maintenance. Work will begin in 2025 and be completed in 2026. The project is strategically significant for Eltel and improves its growth prospects.

Here are @Aapeli_Pursimo’s comments on the matter. :slight_smile:

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Tässä on Aapelin ja Christofferin ennakkokommentit, kun Eltel julkistaa Q4-tuloksensa perjantaina. :slight_smile:

We expect the company’s reported revenue growth to be in the red but adjusted EBITA to improve from the comparison period. In addition to the figures, we are interested in the comments on the market outlook and overall strategy execution.

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Here is a fresh company report on Eltel after Q4, prepared by Aapeli and Christoffer. The text has been translated into Finnish by an automatic translator; the report itself (PDF) has not been translated into Finnish. The report is in English.

We reiterate our Reduce recommendation for Eltel and our target price of SEK 7.20. The company’s Q4 report met our expectations at the group level and showed continued improvement in profitability and a reduction in indebtedness. Following recent large contracts, we have raised our revenue forecasts, which naturally also increased our profitability assumptions in absolute terms. However, in our opinion, this year’s multiples are high, and the expected risk-adjusted return over the next 12 months does not provide sufficient support for the share price.

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Christoffer Jennel interviewed Eltel’s CEO Håkan Dahlström after Q1. :slight_smile:

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Christoffer Jennel ja Aapeli ovat tehneet uuden yhtiöraportin Eltelin Q1-rapsan julkkarin jälkeen. :slight_smile:

We increase our target price for Eltel to SEK 9.0 (was SEK 7.2) and our recommendation to Accumulate (was Reduce). The Q1 performance was broadly in line with our estimates in terms of revenue. However, what clearly stood out was the strong profitability, as the company delivered a positive operating result in a quarter that is typically loss-making due to seasonal effects. As such, we are seeing increased evidence of Eltel’s strategy and focus on operational excellence yield notably tangible results. Cash flow was also very strong for a first quarter, supported by efficient working capital management and improved profitability. Following the report, we have revised our profitability estimates upward while leaving our revenue assumptions largely unchanged. In light of the improved earnings outlook, we think the current share price level offers a good expected return over the next 12 months on a risk-adjusted basis.

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Eltel clarifies its capital structure with a new bond and a buyback of hybrid bonds, which strengthens its financial position.

Here are Christoffer Jennel’s comments regarding it:

EDIT: Changed to the Finnish translated version. :slight_smile:

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@lucas.mattsson has written comments, as Eltel has made a new framework agreement with E.ON. :slight_smile:

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Christoffer Jennel and Aapeli have provided their preliminary comments as Eltel publishes its Q2 report on Thursday. :slight_smile:

As the effects of last year’s divestment of the Polish business (divested in June 2024) diminish, we expect moderate revenue growth and an improved EBITA margin, supported by general cost efficiency and a strengthening gross margin. As always, management’s comments on market outlook and strategy implementation are key focus areas of the report.

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Eltel’s CEO Håkan Dahlström was interviewed by Christoffer Jennel after Q2. :slight_smile:

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Christoffer Jennel and Aapeli have prepared a new company report on Eltel after Q2. :slight_smile:

Eltel’s Q2 report was weaker than expected across the board. Although profitability continued to improve year-on-year, the decline in revenue was somewhat unexpected, and the total order backlog remained low. Management cited customers’ continued slow decision-making and fewer orders within existing framework agreements during the quarter as reasons. On the positive side, Eltel is gaining a foothold in new and adjacent markets, and revenue from new businesses has more than doubled from the previous year. However, taking the Q2 report into account, we have revised our forecasts downwards, especially regarding profitability. Nevertheless, we believe that the company’s recently improved debt structure and steady improvement in profitability have lowered the company’s risk profile and warrant a lower cost of capital. The net effect of the changes had a positive impact on our fair value for the share. Considering the recent rise in the share price, we now estimate the risk-adjusted return over the next 12 months to be insufficient. Therefore, we lower our recommendation to Reduce (previously Add), but raise the target price to SEK 9.7 (previously SEK 9.0).

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Here are Christoffer Jennel’s comments on Eltel’s four-year contract with Caruna. :slight_smile:

Eltel announced on Monday that it had signed a four-year extension agreement with Caruna, Finland’s largest electricity distribution company. The contract is valued at approximately EUR 81 million and covers services related to ensuring the reliability of electricity distribution. Although the agreement is a continuation of previous cooperation rather than a new opening, it is still a positive development as it strengthens Eltel’s order book and provides long-term visibility for the Power business in Finland. Thus, the news supports our forecasts for the stability of the core business and has no direct impact on our forecasts or our view of the company.

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Christoffer Jennel has prepared a new comprehensive report on Eltel. :slight_smile: As usual, this comprehensive report is also available for everyone to read, with no paywalls. :slight_smile:

Eltel has continued its gradual turnaround, demonstrating concrete profitability improvements while maintaining a strong position in its core areas and expanding into new market segments. After years of restructuring and weakened profitability, the business is now more streamlined, operationally disciplined, and increasingly exposed to growth areas such as renewable energy, e-mobility, and data centers. While the turnaround is still ongoing, recent developments support improved visibility for stable cash flows and a recovery in profitability. We reiterate our target price of SEK 9.70 but upgrade our recommendation to Add (previously Reduce), as we see the recent weakness in the share price improving the risk/reward ratio.

Quoted from the report:

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Hello everyone! My name is Christoffer Jennel and I am responsible for analysis monitoring at Eltel. Since our forum has now switched to multilingual mode, you can ask me questions and I will participate in the discussion here.

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