The report’s highlights were that net sales increased in line with our expectations, reaching SEK220m versus our estimate of SEK216m (1% deviation), and working capital improved from last quarter. The low points were a reduction in the EBIT-margin target to 15% ± 2pp from earlier 15-20% and a significantly lower EBITDA- and EBIT margin than projected. The transition to periodization of income and higher OPEX due to organizational investments weighed on the margin. We expect this to weigh on the margin during 2024e, but these are transitional. Hence, we expect the EBIT margin to move towards 15% over the next two years.

Our analysis shows a 15% weighted average EBITDA margin across acquisitions, with 2023's acquisitions at 10.5%. With a reported 'normalized' EBIT margin of 12.5% and the new EBIT target, we foresee limited synergy gains from recent acquisitions but expect future growth to come from new ones. InfraCom has a SEK175m credit line, with SEK44m available. Given a net debt to EBITDA ratio well below the 2.5x covenant limit (2023’s ratio was 0.6x), InfraCom's balance sheet supports further acquisitions.

Following the new target for its EBIT margin, we have adjusted our short-term and long-term financial forecasts downward. The main change is a reduction in our EBITDA and EBIT margin projections. We anticipate that 2024e will mark the lowest point for margins. We have revised our valuation of InfraCom’s fair value range from SEK 25-52, with a previous base case of SEK40, to SEK 22-45, with a new base case of SEK37. Solid financial reports and strategic acquisitions have historically been key drivers of InfraCom’s share. We expect these factors to continue to support the company’s share price in the future. However, we do not expect any significant acquisitions to be announced during 2024.