- 86% of recurring revenues
- Strong presence in Lombardy, the richest region of Italy. Especially in Brescia (the second largest city in the region) where they have around 10% of the market share.
- Less than 5% churn rate, extremely low compared to competitors.
- 9,700 km of network with a capability of up to 100,000 users
- Gain of tenders
What is Intred?
Intred is an Italian small-cap operating in the telecommunications sector with a market capitalization of ~€185 million. It is the most comparable listed company to the previously analyzed Unidata. It provides fibre network infrastructure, data, and voice services to retail, public administration, and business clients in the richest and most populated region of Italy, Lombardy.
Although it was founded in 1996, it was not until 2010 that they started to build their fiber proprietary network. The growth since then has been impressive with a 26% CAGR in revenues since 2015. And all this growth comes with solid profitability (+40% EBITDA and +25% EBIT margin in FY 2022) and a good cash positioning (net debt less than 1x EBITDA) to continue to invest in the fiber network. Since the IPO in 2018, the company has had spectacular growth, multiplying revenues by more than 2.5x in just four years.
Moreover, the company has been awarded two tenders valued at around €60 million to provide connectivity to over 5,300 schools in the region of Lombardy. With over 9,700 kilometers of fiber optic network and 46,700 clients, Intred is ready to continue growing maintaining excellent margins and customer service quality (churn rate<5%).
The company is controlled by Daniele Peli (the CEO and one of the founders) and his wife. Between them, they own more than 60% of the shares. After a tremendous rally after the IPO, the stock price has recently dropped almost 50% from all-time highs. And although the valuation remains exigent (c.P/E 20), the recurrence of revenues, the attractiveness of the sector, and the growth prospects could justify an opportunity on the stock.
The opportunity in the sector, School tenders, and Intred’s approach
In Unidata’s thesis, we already analyzed the opportunity that connectivity providers are addressing. Italy is behind the European average in terms of fiber penetration. This problem is being strongly pushed forward by local, national, and European institutions. A new report published by the FTTH Council Europe indicated that Italy is one of the fastest-growing countries in the number of new homes covered by FTTH.
Intred can be one of the multiple players that will help to accelerate the digital transition and connectivity in Italy. It is key to be the first in building the infrastructure because once built, it is not worth it for the rest of the competitors to develop the infrastructure in the same exact place. And if another player wants to operate these areas, they will have to sign an IRU that will generate stable and long-term revenues and profit for the proprietaries of the network.
Intred and Unidata are both specialized in FTTH, which is the connectivity solution with the highest speed and most secure. FTTH is growing much more than the rest of the solutions and this trend will continue.
We can also see this tendency in Intred’s revenues, with FWA and Broadband Connectivity decreasing the share of revenues to the detriment of Ultra Broadband Connectivity