Q1 2023 net sales amounted to SEK106.6m and increased by 44% y/y following solid acquired growth in the quarter, which was 6% below our expectations. At the same time, EBIT amounted to SEK22m, corresponding to an EBIT margin of 21%, stronger than our expectation of 18%. We believe the sale outcome partly could be explained by Infracom’s natural fluctuations, with its recent increased share of hardware sales. However, Infracom seems to have realised more considerable synergies from the recent acquisitions than anticipated, which we state was a highlight in the quarter.

According to management, the quarter has seen the continued realisation of synergies from recent acquisitions, which is expected to continue. Looking ahead, we believe Infracom is facing interesting times, as its latest acquisitions, Datatal and Connect, were consolidated as of 3 April 2023 and will thus be consolidated in Q2 2023. We consider the Connect acquisition transformative, adding SEK406m in sales based on pro forma figures, although it will initially dilute the group’s margins. We believe this lays the foundation for continued substantial acquired growth while it will create somewhat increased uncertainties about future margins.

We update our 2023e and 2024e forecasts following Infracom’s Q1 2023 report, decreasing our sales assumptions slightly while at the same time increasing our EBIT margin assumptions somewhat due to faster and more considerable synergies realised than expected. However, our DCF model keeps the valuation intact with a Base Case of SEK38 and Bear and Bull Cases of SEK23 and SEK50, while Infracom is currently trading at an EV/EBIT of 10x based on our 2023e.