We raise our recommendation for Eltel to Accumulate (was Reduce) and lift our target price to SEK 14.0 (was SEK 13.8) ahead of the company's Q2 report on July 21. The upgrade is driven primarily by the ~15% share price decline since our late June update, which, in our view, has moved the valuation back to a more attractive level. Alongside this, we nudge our 2026-2028 estimates slightly higher to primarily reflect the recently announced 54 MEUR of Finnish contract wins, while our Q2 estimates are left unchanged. We continue to expect solid, Power-led top-line growth and a further year-on-year margin improvement. Our focus in the report will be on the sustainability of the Norwegian turnaround, management's qualitative market outlook, and commentary regarding the path to its 5% adjusted EBITA margin target.

Power and contract wins support top-line momentum, with margins expanding further

We forecast Q2 revenue of 212 MEUR (Q2'25: 201 MEUR), up 5.3% year-on-year, driven primarily by the Power segment, particularly solar PV and data center projects in Finland. We expect the growth rate to normalize from the exceptionally strong 29% seen in Q1 due to project phasing. We believe Norway should continue its gradual top-line recovery following its return to growth in Q1, supported by continued customer base expansion in Emerging services. The year-on-year appreciation of the Norwegian krone provides an additional translational tailwind and represents a small upside risk to our estimate. On profitability, we estimate adjusted EBITA of 5.0 MEUR, a 2.4% margin (Q2'25: 2.5 MEUR, 1.2%), reflecting the mix shift toward higher-margin Emerging services, improved operational efficiency and stricter pricing discipline, even as slightly elevated input costs (e.g., fuel and asphalt) and some one-off rightsizing costs in Denmark likely weigh modestly. Our key watchpoints in the Q2 report are the sustainability of the Norway turnaround, early signs of stabilization in Denmark & Germany following Q1 rightsizing, and management’s commentary on the path to its 5% adjusted EBITA margin target within the stated 12--18 month timeframe. Additionally, we will look for qualitative commentary on any potential implications or knock-on effects from the prolonged Iran/US conflict, both on input costs and supply chains.  Lastly, we will closely monitor the company’s working capital management and deleveraging progress toward the 1.5-2.5x net debt/adjusted EBITDA target range.

New Finnish contracts lift our estimates modestly…

We leave our Q2 forecasts intact but raise our annual estimates modestly following the 54 MEUR of Finnish contract wins announced in July (read our comment here). As some of the volume already begins in Q3’26, with the bulk weighted toward 2027-2028, we nudge 2026e revenue up only slightly to 865 MEUR (was 864). For 2027–2028, we lift revenue by ~1%, with a corresponding effect on our absolute EBITA forecast, while our margin assumptions are unchanged at 3.6%/4.0% for 2026–2027. The pending Vattenfall framework agreement offers potential further upside to our estimates, should it be formally signed.

…while a cheaper valuation restores a favorable risk/reward

Following our late June update, the stock has experienced a ~15% pullback, which has compressed Eltel’s overall earnings-based multiples back within our acceptable ranges in 2026 (2026e EV/EBITDA ~5x, EV/EBIT ~11x and P/E ~16x). We expect revenue growth and continued margin improvement to compress these multiples further into 2027, easing to ~5x, ~9x, and ~10x in 2027. With the operational turnaround story intact and the valuation no longer stretched, we think the risk/reward has turned favorable again. Our DCF model supports a value per share of SEK 14.1 (was SEK 13.8), in line with our target.