Redeye maintains a positive view of Transtema following a Q2 beating our expectations. While the Q2 numbers were on the soft side as expected (yet better than expected), the most important takeaway is that the worst likely is over, and Transtema enters 2025 with a solid order backlog. Although we somewhat lower our expectations in Norway, we retain our positive view of 2025.

Transtema

* Transtema's revenue base is not well diversified, with a high dependence on key customers like Telia and Telenor, potentially impacting bargaining power and stability.
* The company's installation business has clear cyclical exposure, which could lead to revenue volatility during economic downturns.
* Transtema's competitive advantages are not easily identifiable or sustainable in the long term, given the nature of its service-based business model.
* The company's returns on invested capital are currently at a low level, potentially indicating challenges in value creation.
* Employee satisfaction appears to be low, with a negative eNPS score, which could impact productivity, talent retention, and overall company performance.

* Transtema benefits from secular tailwinds in digital communication, driving demand for its services and positioning it well for future growth.
* The company operates in a market with few dominant players, reducing competitive pressure and potentially allowing for better pricing power.
* Transtema's core business of installation, service, support, and maintenance for communication networks is unlikely to be disrupted, providing long-term stability.
* The company is proactively promoting environmental sustainability through initiatives like using renewable fuels and transitioning to electric vehicles.
* Transtema works closely with customers, fostering innovation and transparency in its business relationships.

* Return on Equity (ROE) below 20% for the last five years, suggesting inefficient use of shareholder capital.
* Earnings growth inconsistent and below historical averages, potentially impacting long-term valuation.
* Lack of consistent dividend growth and payments, limiting appeal for income-focused investors.

* Return on Assets outperforms industry average, suggesting superior asset utilization and profit generation.
* Consistent above-average revenue growth over the last five years, signaling market share gains and competitive strength.
* Healthy debt management with Net Debt less than two times Operating Cash Flow and five times Free Cash Flow.
* Efficient inventory management with inventory-to-sales ratio below 20% and its 5-year average.

* Management team's average tenure is slightly less than five years, potentially limiting institutional knowledge and continuity.
* Recent investments, particularly acquisitions in Norway, have not generated attractive returns on capital.
* Share count has increased over time without corresponding EPS growth, potentially diluting shareholder value.
* Less than 50% of board members have substantial holdings, potentially reducing alignment with shareholder interests.

* Strong leadership with a clear long-term vision, focusing on pan-Nordic presence, sustainability, and security in the telecom sector.
* Decentralized organization promoting accountability, with a well-defined strategic plan and consistent communication of company values.
* Transparent and timely investor communication, with management being candid about mistakes and focusing on long-term business value.
* Founder involvement as chairman and significant insider ownership (about 20%) demonstrate alignment with shareholder interests.
* Diverse board with relevant expertise in finance, entrepreneurship, and telecom, supporting the company's strategy and M&A ambitions.

SEKm	2023	2024e	2025e	2026e	2027e
Revenues	2,692.7	2,348.2	2,535.9	2,687.9	2,795.3
Revenue Growth	9.0%	-12.8%	8.0%	6.0%	4.0%
EBITDA	191.1	179.0	236.5	248.1	257.4
EBIT	58.6	51.5	106.5	119.8	128.4
EBIT Margin	2.2%	2.2%	4.2%	4.5%	4.6%
Net Income	171.9	19.7	74.5	84.9	91.6
EV/Sales	0.3	0.4	0.3	0.2	0.2
EV/EBIT	12.6	16.4	7.0	5.3	4.1

Encouraging Q/Q Improvement – Yet Soft Q2

Deal Inflow Remained Strong

New Base Case SEK27 (29)

Key financials