• Adj. EBITA EUR 9.1m, above ABGSCe 7.0m and up y-o-y
• We raise our adj. EBITA estimates by EUR 3-1m for '25e-'27e
• Nine-quarter streak of y-o-y adj. EBITA improvement

Profitability improvements showing

Eltel reported a strong set of numbers, with adj. EBITA increasing to EUR 9.1m (8.2m), beating our estimate of EUR 7.0m, for a margin of 4.4% (3.9%), despite sales being down 2% organically. This marks the highest margin in a single quarter for Eltel since 2015, and while we stress that seasonal patterns will of course persist, likely leading to a weaker Q4 and Q1 ahead, this still clearly highlights that structural profitability improvements have been made. Cash flow was hampered by significant working capital build-up in the quarter, causing the net debt position (ex. leases) to increase to EUR 118m (from 91m in Q2). However, we expect cash flow will be significantly better in Q4. It is also worth mentioning that the company repurchasing its high-cost hybrid bond has also helped to improve the cash flow outlook.

EBITA raised by EUR 3-1m, driven by Finland

As we mention above, we argue that there are structural factors underpinning the margin expansion, so we raise our adj. EBITA estimates for '25e-'27e by EUR 3-1m. The main driver of this is Finland, which reported an impressive EBITA margin of 8.7% in the quarter.

11-8x '26e-'27e EV/EBITA, 7-9% lease adj. FCF yields

We now model an adj. EBITA margin of 2.3-3.9% for '25e-'27e, still not quite at the company's target of 5%. On our '26e-'27e estimates, the share is trading at 11-8x EV/EBITA and offering lease adj. FCF yields of 7-9%. Most importantly, Eltel now has a nine-quarter streak of y-o-y adj. EBITA growth, and with favourable mix shifts ahead, as the legacy power and communication end-markets give way to new markets such as solar PVs and data centres, we expect this trend to continue.