Eltel Q3'25 preview: Strong earnings growth expected

Source: Inderes

Eltel is set to release its Q3 earnings report on Thursday, October 30, at 08:00 am CET. We expect Sweden to continue showing good momentum in public infrastructure projects and solid growth in Finland’s Power segment. Combined with the absence of negative effects from the divested Polish business and some currency tailwinds, we expect these factors to support solid top-line growth in Q3. Alongside ongoing strategy execution and focus on profitability, we forecast yet another quarter of year-on-year improvement in the EBITA margin. As always, management’s comments on the market outlook and strategy execution will be key focal points in the report.

We expect reported growth to turn positive after four consecutive quarters of decline 

We forecast Eltel’s Q3 reported revenue to be 222 MEUR, corresponding to a 6% increase year-on-year (Q2’24: 210 MEUR). With the absence of the high-voltage business in Poland in the comparable period, there is no longer any negative year-on-year impact in Q3.

On a country-unit level, we expect Finland and Sweden to pose the strongest year-on-year growth (7.5% and 9%, respectively), where we anticipate growth in Finland to be primarily driven by the Power segment (via e.g. the Taaleri Energia project), and in Sweden, we expect the strong momentum in public infrastructure projects to continue, as well as good demand levels in Solar PV. We also note that the stronger SEK against EUR should provide a tailwind to reported growth in Sweden. However, risks to our estimates in Finland and Sweden mainly include the pace of moderation in Finland’s FTTH businesses, as well as Sweden’s ability to offset a strong comparable period (driven by finalization of projects ahead of schedule) through e.g. increased public infrastructure activity, while also facing moderating Smart grid volumes.

In Denmark & Germany, we expect revenue growth of around 3%, while in Norway, revenue growth is estimated to decline by about -3% year-on-year, reflecting a smaller decline than in previous quarters. We believe the ongoing efforts in broadening the customer base, coupled with a soft comparable period (given the fast decline in investment levels within traditional telecommunication) should support a gradual return to growth from Q4 and onwards. However, regarding the latter, the recent profit warning from the competitor Netel does cast additional uncertainty on the Norwegian telecom market, and thus, our estimates for Norway in the near future.

Another quarter of profitability improvement is expected

Profitability-wise, the third quarter is typically the strongest quarter for Eltel, and we expect revenue growth coupled with improving gross margins to support a continued positive development in group profitability. We estimate adjusted EBITA of 9.6 MEUR (Q3’24: 8.3 MEUR), corresponding to an adjusted EBITA margin of 4.3% (3.9%). We estimate small margin improvements from all country-units, driven by stricter control of contract pricing, increased operational efficiency, and increased focus on selectiveness in accepting new contracts. Better commercial terms, both in new and existing contracts, and a higher share of new business volumes are also expected to contribute to the profitability improvement.

In Norway, we expect previous restructuring and downsizing measures, combined with moderating sales declines, to result in a return to profitability in Q3’25 (adj. EBITA margin: 0.8%). However, this remains contingent on actual sales performance during the quarter, as we believe that Eltel has done what it can on the cost side.

At the bottom line, we forecast financial expenses of 3.1 MEUR (vs. ~2.6 MEUR/quarter in H1’25), reflecting modestly higher debt levels following June’s bond issue. We expect taxes to remain low due to carryforward losses (mainly in Sweden), resulting in an EPS of EUR 0.04, also supported by the removal of the hybrid bond.

Market outlook remains in focus

Since Eltel does not issue numerical Group guidance, our attention remains on qualitative signals regarding the market outlook across its country units. For the full year of 2025, we estimate Eltel’s revenue to increase by 1% to 834 MEUR, reflecting the relatively soft H1’25. At a country unit level, we expect the main contributor to be Sweden with around 9% revenue growth, supported by a good momentum in public infrastructure and solar PV projects, as well as favorable exchange rates (stronger SEK to EUR). We also estimate that Finland will report growth of 2% supported by signed new contracts (TCV) and, what we believe, a higher degree of project realization from the significant Taaleri Energia project (solar PV). In addition, we expect a solid demand within the Power segment and expansion into new and adjacent markets to support the growth during 2025. Combined with ongoing operational efficiency improvements and continued strategy execution, we forecast 2025 adjusted EBITA of 21.5 MEUR (2.6% margin).

While we believe Eltel’s Nordic focus largely insulates it from global trade turbulence, we note that macroeconomic and geopolitical risks could still delay customer decisions, project rollouts, and frame agreement call-offs. In addition, near-term risks remain for Norway (given the Netel profit warning and weak market dynamics) and Finland (due to softening FTTH volumes). Over the longer time span, however, structural trends such as electrification and digitalization are likely to drive substantial infrastructure investments, which are factors we believe support Eltel’s long-term growth trajectory.