Q2 2023 net sales amounted to 392.7m (382.7m), corresponding to a 2.6% y/y growth and were slightly above our expectations of SEK385.8m. Despite a slightly lower gross margin than expected, 33.7% (35.0%), versus the expected 34.2%, lower OPEX upheld this, which resulted in higher-than-expected margins. The EBITDA and EBIT amounted to SEK61.9m (59.2m) and SEK26.1m (21.1m), 4% and 11% above our expectations, respectively. Consequently, the EBITDA margin was 15.8% (15.5%) versus the estimated 15.4%, while the EBIT margin came in at 6.6% (5.5%) compared to the expected 6.1%.

The improved margins y/y stem from continued margin prioritising, which is expected to continue, as Bredband2 reiterated its aspirations to improve the EBIT margin by c1pp to Q4 2023. As such, we state that the higher-than-expected margins in Q2 2023 indicated continued execution of margin-enhancement efforts, which we appreciate seeing. Despite management’s expectations of a temporary softer customer intake, we note the net customer intake of zero in the quarter as solid concerning recent margin prioritising and price hikes. Moreover, management expects increased sales during the remainder of 2023, both within its private and corporate segments.

We make minor 2023e and 2024e forecast adjustments on the back of Bredband2’s Q2 2023 report. We raise our sales forecasts by 1%–2% for 2023e–2024e while we trim our gross margin assumptions slightly. However, a lowered OPEX offset this, leading to a 4% increased EBIT forecast for the period. As such, our DCF model yields a new Base Case of SEK2.0 (1.9) per share and Bear and Bull Cases of SEK1.1 (1.0) and SEK2.6 (2.5), respectively. Currently, Bredband2 is trading at an EV/EBIT of 10.7x based on our 2023e and an EV/EBITA of 8.2x.