Sales up 92% y-o-y, of which 8% is organic

‘21e estimates slightly down on EBIT miss

12x EV/EBIT, ‘22e-‘23e lease adj. FCF of 6-7%

Q3 results
Sales were in line with our expectations at SEK 183m (0% vs. ABGSCe 183m) 92% y-o-y, of which 8% was organic. All of the organic growth was attributable to Norway, which grew 30% y-o-y on strong sales to network operators whereas Sweden was flat y-o-y. Meanwhile, EBIT was somewhat softer than expected at SEK 17.3m (-9% vs. ABGSCe 19m), corresponding to an EBIT margin of 9.5% (7.1%) vs. ABGSCe 10.4%. The margin miss was attributable to higher-than-expected opex. To our understanding, Alcadon is strengthening its organisation in Denmark and Germany to meet the high demand, which is pushing personnel costs higher. However, since the announced orders do not commence until Q4’21 (and ramp up during ‘22e), this puts temporary pressure on the margin and is the main explanation for the margin deviation.

Estimate changes and outlook
Alcadon seems to be managing the current component shortages relatively well. Some of its co-suppliers, however, are having difficulties delivering to end-customers. We believe this is most apparent in Germany and Denmark, and note that some projects have been moved one quarter ahead. Consequently, we move some of our Q4’21e sales into ‘22e, resulting in our ‘21e sales and EBIT estimates falling by 2% and 8% (this quarter’s EBIT miss also contributed to EBIT falling), respectively, and ‘22e sales rising by 2%. All in all, we estimate ’20-‘23e sales and EBIT CAGRs of 35% and 45%, respectively.

12x ‘22e EV/EBIT does not reflect the M&A opportunity
Alcadon is trading at 12x ‘22e EV/EBIT and offers a ‘22e-23e lease adj. FCF yield of 6-7%. We do not include any further acquisitions in our estimates, but we note that management are very clear that M&A is a key priority going ahead. We feel confident in Alcadon’s ability to conduct value-creating acquisitions for two reasons: 1) the impressive acquisition of 6X Interna
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