Consti - Awaiting better market conditions
Consti reports its Q2 results on Friday 19th of July. Our main interest on the report lies on the order intake, which has traditionally been the strongest during the second quarter. Market conditions remain challenging while the backlog is still on a healthy level for FY 2024.
Expecting similar net sales to the previous year's level in Q2
While the market remains challenging and the backlog declined y/y in Q1/24, we expect that the ongoing public projects will continue to support Consti. For Q2/24, we estimate net sales roughly at the same level as in Q2/23 helped by the company’s Public Sector and Building Technology business areas. Some projects in the Building Technology business area did not contribute to Q1/24 sales as the company expected and we estimate that these projects started to contribute during the second quarter. While we expect flat sales development for Q2, we estimate revenue decline for FY as we expect that the company’s disciplined tendering activities coupled with intensified competition will affect new project starts during 2024.
Market conditions have remained challenging
Value of renovation in Finland kept declining during the first quarter as the value of Finnish renovation dropped over 15% y/y. In the Q1 report, the company commented that it doesn’t anticipate significant improvement in market conditions during the second quarter. The two main headwinds remain high interest rates and construction costs. While the cost inflation has slowed down, the construction costs have remained at a high level. On the other hand, while the ECB cut its rate by 25bps, the rates are still at a high level. Although market sentiment is largely negative, there are some positive indications. Survey study by Finnish Association of HVAC Technical Contractors showed some improvement in the sentiment across all the renovation segments in the Spring 2024 survey results when compared to results from last September.
Valuation remains attractive despite short-term headwinds
Consti is still priced at attractive multiples on our estimates as EV/EBIT for 24-25E is at 7-6x and P/E at 10-8x. These multiples continue to present discount to both the peer companies and Consti’s own historic multiples.