Margin resilience, capex remains elevated

Solid EBITDA but higher capex

Valuation uplift has materialised - HOLD

Solid Q2 with accelerating EBITDA growth

Q2 delivered healthy MSR growth of 5% and improving IDS supporting op. leverage; EBITDA growth accelerating 4 Q's in a row. Limited changes to outlook - keep BUY.

In line, but accelerating EBITDA growth

Declining premium creates good entry

Q2e solid as usual, comp. EBITDA up 3% y-o-y. Operational superiority remains, but the premium is shrinking. This is creating a great entry at 5.5% div.yield and >4% DPS CAGR.

A much more attractive dividend yield than 5 months ago

Elisa’s Q3 was globally in line with expectations with revenues and EBITDA up by 2% yoy, like in the previous quarter. We had a Reduce recommendation on the stock back in May as the dividend yield was, at that time, only 3.85% (vs a Finnish 10Y rate at 3/3.25%) but, for the past three months, we have again been at Add. Elisa’s stock price has fallen by 25% since May while the Finnish 10Y has increased by 15%, and its dividend yield is now 5.1%.

Further dividend growth in line with revenues

Elisa’s Q2 was globally in line with expectations with revenues up by 2.2% yoy and EBITDA up by 1.8% yoy. With c.3-4% organic growth in FCF forecast for the next few years, the stock should oscillate in a 3-4% ascending range in line with the Finnish 10y rate. Note that the current spread between the dividend yield (4.35%) and Finnish rates (2.85%) is currently 150bp. We maintain our Add on the stock with a potential 10% upside.

A dividend yield at 3.9% vs Finnish rates at 3%

Elisa’s Q1 was globally in line with expectations with revenues up by 5.5% yoy and EBITDA up by 3.5% yoy. The main issue is that we don’t see Elisa entering a virtuous circle of vigorous FCF growth in the coming years. We therefore do not expect further outperformance from Elisa’s stock as the spread between its dividend yield (3.9%) and Finnish interest rates (3%) is at its low. We remain at reduce on the stock (however with no downside potential)

A dividend yield lower than the current level of US rates

A more-disappointing-than-usual report from our Finnish telco with 5% revenue growth and EBITDA up by 4% yoy. With 3% organic growth in 2023 the group does not deserve a valuation premium to its peers. The group is now offering a 4% dividend yield. This is the sector best and it is lower than the current level of US rates. In over view the stock is now fairly priced and offers no real upside potential.

A more reasonable dividend yield

A pretty good release as usual for our Finnish telco with 8% revenue growth and an EBITDA up by 4% yoy. With 6% organic growth the group deserves a higher valuation than its peers. Elisa shares were valued too highly at mid-August (we were at Reduce) considering that a sharp rise in interest rates was expected. At that point, Elisa was offering a 3.7% dividend yield but this now stands at 4.3% and we are again at Add.

A too low dividend yield with current inflation pressurising interest rates?

Elisa released a fairly solid Q1 with slightly better than expected numbers. The stock was however down by 3% this morning. As with its peers offering a best-in-class dividend yield, the stock is currently fairly valued after a recent c.12% run-up in less than a month. Given the upward pressure on European interest rates due to inflation fears we would recommend caution. Some telcos now look toppy with dividend yields lower than those prevailing prior to the Covid crisis.

Does it really deserve to offer the lowest dividend yield?

Elisa released its Q4 numbers last week. The key point was that the dividend for 2021 will be €2.05 per share (up by 5% yoy). But the group is already offering the lowest dividend yield of its sector. And, when we see that KPN is becoming a real organic slight growth story likely more dynamic than Elisa, we understand that Elisa is at its price. We maintain therefore our Reduce on the stock.

Still the proxy fair price of the sector

A Q3 performance 1ppt above that of Q2 but due to roaming improvement. The group remains indeed a solid and reassuring slight growth story in the telecom sector. We remain, however, at Reduce on the stock with a limited downside of only 3%. Elisa’s stock has just returned to its pre-pandemic level. This means for us it is now again at its fair price, very expensive in terms of EV/EBITDA and offering a best-in-class 3.85% dividend yield.

A reassuring slight growth story at... its fair price

Globally, no surprise about Elisa’s Q2 results but the group remains a solid and reassuring slight growth story in the telecom sector. Elisa’s stock is just about to return to its pre-pandemic level. It means for us that it is now again at its fair price, very expensive in terms of EV/EBITDA (>13x) and offering a best-in-class 3.8% dividend yield. We have been for a week at Reduce on the stock with no downside.