Consti - Valuation doesn’t set the bar high

Strong backlog supports the development in H2

Consti’s order backlog finished at all time high levels of EUR 297.9m at the end of Q2 2023. We expect net sales of EUR 81.5m with growth of 3.1% for Q3, for FY 23, we estimate revenue growth of 5.4%. The expected growth during H2 is driven by the current strong backlog of projects. In terms of profitability, we estimate EBIT of EUR 3.4m for Q3 and EUR 12.2m for FY 2023, within Consti’s EBIT guidance range of EUR 9.5-13.5m. The sale of the company’s property-related relining business to Spolargruppen might have a slight positive effect on the Q3 result yet we have not included it in our estimates.

Signs of weakening demand for renovation

Confederation of Finnish Construction Industries (RT) revised its estimates of Finnish renovation construction volumes downwards in September. Before, it had projected growth of 1.5% for 2023 and a 2% increase for 2024. However, the revised forecasts now indicate a 4% reduction in volumes in 2023, with the decline persisting into 2024, where volumes are anticipated to decrease by 1%. The main drivers for the weaker outlook include cost inflation and tighter financing environment. In addition to RT, the Finnish Association of HVAC Technical Contractors published their balance figures for renovation construction which declined notably from the figures published in March. Despite the negative outlook spreading from new construction to renovation construction, we see that Consti is well positioned within the renovation segment. Consti mainly operates in the largest cities within Finland where the market is expected to fare better when compared to more rural areas.

Valuation remains conservative

Our TP values Consti at roughly 12x 2023 P/E and 9x 2023 EV/EBIT. Consti trades at a discount to both our peer group and the company’s own historical valuation levels. We continue to see the current pricing hard to justify given the company’s exposure to the more stable renovation market.