Sales was SEK603m (617) and came in 14% below our forecast of SEK702m. Organic growth was negative 16%, while our forecast was -2%. Sales in Sweden was -15% organically due to the liquidation of copper networks and a lower overall demand. Sales in Norway was -19% organically due to postponed orders following the storm “Hans” and lower overall demand. EBITA (adjusted for SEK16m in restructuring costs) was SEK21m (47.1). Our forecast was SEK 32m. While short of our forecast, far from the >7% target, and declining y/y, the adjusted EBITA margin increased q/q to 3.5% compared to 3.0% in Q2 2023.

We lowered our sales forecast for 2024 by 15% and reduced our EBITA forecast by 34%. While several factors are pointing towards improving organic growth and EBITA margin from now on – such as the 5G deal with Telenor and a better momentum in the later parts of the quarter – our previous forecasts were based on stronger market conditions. However, we still expect gradually improving margins. For 2024, we expect a negative organic growth of 7%, below Transtema’s target (+10% total growth) but still a substantial improvement compared to the current run rate. Regarding the EBITA margin, we forecast 4.7%. Although management seems rather optimistic about Q4 and 2024, we take a slightly more defensive approach.

We lowered our Base Case from SEK42 to SEK26 on the back of the estimate revisions and a raised WACC, following us increasing the risk-free rate from 2.5% to 3%. The bulk of the reduction is related to lowered short- and long-term forecasts. Despite the significant cut in our Base Case, where our new assumptions are much more defensive, Transtema is still trading at a substantial discount to our revised Base Case. Thus, we believe the risk/reward is attractive if Transtema increases its EBITA margin to ~5% over the next two years – below its financial target of >7%. Transtema trades at 5.8x EBIT on our 2024e forecasts, compared to a peer median of 8.2x.