Net Insight - Expecting another quarter of organic growth

We see organic growth continuing in Q2e (+16%) FX headwind to be expected (-9% vs. Q2’20) 20x 2023e EV/EBIT We expect continued positive momentum in Q2 We expect the positive momentum and solid organic growth seen in Q4’20 and Q1’21 to have continued in Q2’21e. As previously stated by NETI, customers postponed media network investments during COVID-19, but the last couple of quarters have indicated an acceleration of investments. We believe that the media network market entered Q2’21 with some pent-up demand, in part due to the UEFA EURO 2020 championship (hosted in 11 countries this time), which likely drove demand for broadcasting equipment in H1’21.

In addition, we note that another quarter has passed without an acquisition. Given the opportunity presented by NETI’s cash balance of ~SEK 370m, we believe management is looking for a near- to medium-term acquisition to strengthen either its core or its cloud offering. Estimate revisions We leave our estimates relatively unchanged but recognise a negative FX effect of 9% on sales from a lower USD/SEK and EUR/SEK in Q2.

Consequently, we reduce opex by ~4%, as ~40% of the workforce is employed overseas. We still estimate FX adj. sales growth of +16% vs.

Q2’20 for the continuing business. This results in Q2’21e EBIT of SEK 7. 3m for a margin of 8%.

Closing thoughts Investments into media network capacity can only be postponed for a limited time. The last two quarters have been promising, and after the divestment of ScheduALL in Q1’20, we think NETI is well-positioned to capitalise on a turning market with pent-up demand and turn full-year profitable for the first time in five years. On our estimates, NETI currently trades at 20.

5x ’23 EBIT. We stick to our fair value range of SEK 1. 7-3.

9 per share due to unchanged underlying fundamentals. Q2 report on 16 July at 08:45 CEST.