Following several acquisitions, Transtema has increased its share of revenues coming from installations, resulting in a higher sensitivity for adverse weather conditions – as highlighted in the soft Q1 2023. Despite the rather early winter seen in Scandinavia this season, we retain our forecasts for Q4 2023. As Q4 generally is a seasonally strong quarter, with most revenue generated in October, November, and early December, we do not foresee a notable negative impact from adverse weather conditions in Q4. While Q1 has started cold and snowy, that is typically a feature of Q1, and it has only started. Thus, it is too early to draw any conclusions for Q1. For Q4 2023, we expect a total sales growth of -3 % y/y and -12 % organic growth due to the decline of copper and a softer overall market. We assume an EBITA margin of 4.4%, far below last year’s Q4 of 7.5% but above the 3-3.5% (adjusted) level in Q2-Q3. We believe both seasonality and better underlying cost control will contribute to the improvement.

In late December, Transtema announced a SEK300m deal spanning three years with a large telco, which might be extended with additional volumes. The deal regards planning, design, and installation of technical facilities for communication networks. While it constitutes non-recurring revenue, although spanning three years, we are encouraged to see Transtema adding substantial deals to offset the negative effect of the decline in copper. As we expect new deals to occur here and there, we do not increase our sales forecasts by SEK300m (SEK 100m annually). However, we slightly increase from Q4 2024 and beyond, adding about SEK50m in annual sales. Despite the slight upward estimate revisions, we leave our Base Case at SEK26.

While having a limited effect on sales growth, at least in the initial phase, we are encouraged to see Transtema signing a nationwide deal with a leading EV-charging player like Evify. Considering Transtema’s strategy of becoming a leading nationwide provider regarding installation, service, and maintenance of EV chargers, we believe adding several deals with significant players is crucial to obtaining that position – in a very fragmented market. As frequent readers are well aware, expanding into EV-charging is one of Transtema’s growth areas, aiming to offset the decline of copper and fuel further sales growth.