Higher Energy Costs To Hit Telia in Fiscal 2022 and 2023; Trimming FVE to SEK 35

The most important news in Telia’s third-quarter earnings is a moderation of its financial outlook for fiscal 2022 and 2023. Management estimates a SEK 600 million higher-than-expected energy cost for 2022, or roughly 2% over EBITDA after leases of SEK 27 billion. While the company expects to mitigate part of the increase with cost savings, this will inevitably have an impact on this and next year's financials. Shares are down 7% at the time of the writing on the news. We are trimming our fair value estimate to SEK 35 from SEK 39 after incorporating a more moderate margin outlook in 2022 and 2023. Telia estimates its EBITDA will increase by low- to midsingle digits, excluding energy costs, in 2022 and 2023, so we assume flat growth after incorporating energy costs. We model a gradual recovery in 2024 and 2025.