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Power And Telecom Projects Will Shape European Markets

Published
08 Feb 25
Updated
09 Oct 25
AnalystConsensusTarget's Fair Value
SEK 6.00
16.0% undervalued intrinsic discount
09 Oct
SEK 5.04
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1Y
-76.5%
7D
-10.8%

Author's Valuation

SEK 616.0% undervalued intrinsic discount

AnalystConsensusTarget Fair Value

Last Update09 Oct 25
Fair value Decreased 66%

Analysts have lowered their price target for Netel Holding considerably, from SEK 17.5 to SEK 6.0. This change reflects concerns over slower revenue growth and declining profit margins.

What's in the News

  • Netel Holding has released earnings guidance for 2025, estimating revenue of approximately SEK 3 billion and an adjusted EBITA margin of 1.5 to 2% (company guidance).
  • The projected revenue for 2025 represents a decrease of about 9% compared with 2024. This diverges from the company's target of 3-5% annual organic growth (company guidance).
  • Operations excluding recently discussed companies, which account for over 90% of Netel's expected 2025 revenue, are forecasted to see an adjusted EBITA margin of 4-5% despite lower volumes due to market shifts (company guidance).

Valuation Changes

  • Consensus Analyst Price Target has fallen significantly from SEK 17.5 to SEK 6.0.
  • Discount Rate remains virtually unchanged at approximately 9.97%.
  • Revenue Growth expectations have dropped sharply from 6.0% to 1.4%.
  • Net Profit Margin has decreased from 4.5% to 3.5%.
  • Future P/E estimate has declined from 6.47x to 3.24x.

Key Takeaways

  • Strategic focus and resource allocation through divestment and new agreements support revenue growth and net margin improvement in key European markets.
  • Enhanced operational efficiency through digital tools and improved cash flow positively impact liquidity, reducing financial leverage and supporting earnings growth.
  • Heavy reliance on Sweden and Norway and strong competition in Infraservices threaten revenue stability and future profitability.

Catalysts

About Netel Holding
    Provides construction and maintenance services for communication infrastructure and power networks in Sweden, Norway, Finland, Germany, and the United Kingdom.
What are the underlying business or industry changes driving this perspective?
  • The growing order backlog and strong tender season indicate a solid pipeline of future projects, particularly in Power and Telecom, that could drive revenue growth in the coming years.
  • The divestment of Finnish operations is set to free up resources, allowing Netel to focus on its core and growth markets in Sweden, Norway, Germany, and the U.K., potentially improving net margins through strategic focus and efficiency gains.
  • Recent framework agreements, particularly with Glitre Nett and Tele2, provide a stable revenue base and the opportunity for geographic expansion, increasing the likelihood of revenue growth and margin improvement over time.
  • The implementation of new digital tools is expected to enhance operational efficiency and positively impact margins as fine-tuning continues throughout the year, potentially leading to higher earnings.
  • Seasonal cash flow improvements and the absence of significant one-off costs (such as earn-outs) in 2025 will help improve liquidity and the net debt position, supporting EPS growth as financial leverage decreases.

Netel Holding Earnings and Revenue Growth

Netel Holding Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Netel Holding's revenue will grow by 6.0% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 1.5% today to 4.5% in 3 years time.
  • Analysts expect earnings to reach SEK 172.8 million (and earnings per share of SEK 2.85) by about September 2028, up from SEK 47.0 million today.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.5x on those 2028 earnings, down from 10.8x today. This future PE is lower than the current PE for the SE Construction industry at 15.4x.
  • Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 9.97%, as per the Simply Wall St company report.

Netel Holding Future Earnings Per Share Growth

Netel Holding Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Strong price competition in Infraservices has led to lower margins, and continued high competition is expected in 2025, potentially impacting future profitability.
  • Seasonality in the business results in lower volumes and decreased cash flow in the first quarter, which can strain financial performance in terms of earnings and cash management.
  • The company remains above its capital structure target on net leverage, with net debt at 3.0x compared to the target of 2.5x, indicating potential risk to financial stability or flexibility.
  • The Telecom division, which is the largest by sales, is currently below desired profitability levels, with a low EBITDA margin of 0.8%, suggesting a need for improvements to meet financial targets.
  • Dependence on a few markets (Sweden and Norway account for 93% of sales) exposes the company to regional economic fluctuations, which could affect revenue stability if these markets experience downturns.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of SEK17.5 for Netel Holding based on their expectations of its future earnings growth, profit margins and other risk factors.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK3.9 billion, earnings will come to SEK172.8 million, and it would be trading on a PE ratio of 6.5x, assuming you use a discount rate of 10.0%.
  • Given the current share price of SEK10.5, the analyst price target of SEK17.5 is 40.0% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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