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Earnings improvement, but not as much as we hopedEltel reported Q2 net sales of EUR 200m, down 1% y-o-y, with organic growth of -2%. On a sequential basis, emerging services took a step back to 14% of sales compared to a very strong Q1 at 23%, which was driven by strong deliveries to larger solar projects. However, the strong backlog of emerging service contracts suggests that from a mid- to long-term perspective the strong growth should continue. Adj. EBITA amounted to EUR 5.5m, a clear improvement compared to EUR 2.5m in Q2'25, but below our estimate of EUR 8.4m, and it resulted in a margin of 2.8%. Finland and Denmark in particular saw weaker sales than expected, which also trickled down to profitability, and in Denmark Eltel decided to take some restructuring measures as a result. On a positive note, Norway delivered a sharp uplift in margins, showcasing both the internal efficiency measures taken by Eltel in the region, and improved end-market demand. Adj. EBITA cuts of EUR 3m for '26e and EUR 1m for '27e-'28eWe lower our EBITA estimates by EUR 3m for '26e, followed by EUR 1m per year for '27e-'28e. Our cuts stem mainly from the Denmark & Germany segment, and are partly offset by estimate upgrades in Norway, which we now take a more positive view on following the larger-than-expected margin uplift in Q2. Share trading at 12-9x '26e-'27e EV/EBITA (adj.)The share is now trading at 12x '26e EV/EBITA (adj.), and we model an adj. EBITA CAGR of 22% for '26e-'28e, mainly driven by continued margin improvements. At the end of the quarter, r12m net debt/EBITDA (lease adj.) stood at 2.2x, and we model this going to 1.7x by year-end. As such, we think this may put Eltel in a position where it can start paying out dividends, something that the balance sheet has not supported in recent years. |