Consti - Market headwinds remain
Consti’s Q3/24 figures were in line with our estimates. The company keeps delivering steady results in a tough market. Despite some volume growth expected for Finnish renovation market in 2025E, the market remains challenging in the short-term.
Results in line, backlog at a good level in Q3
Consti’s net sales in Q3 were EUR 86.0m (EUR 89.9m in Q3/23), only slightly above our estimates (EUR 85.1m). Sales declined 4.3% y/y against a tough comparison period. On segment level, Public Sector developed better than we expected while for example Housing Companies and Corporations were softer than we estimated. Operating profit in Q3 amounted to EUR 3.4m (EUR 4.8m in Q3/23), in line with our estimate (EUR 3.4m) at a margin of 3.9% (Q3/23: 5.3%, Evli: 4.0%). The comparison period was tough as it was helped by a gain recognized on a business sale (EUR 1m positive effect). Overall, there were no large surprises in the cost base. The order backlog at the end of Q3 was EUR 250.4m (EUR 247.3m in Q3/23), growing 1.3% y/y. Order intake was EUR 64.8m in Q3 (Q3/23: EUR 23.2m). Order intake was significantly stronger compared to last year and the order backlog stays at a good level. The order intake included some larger orders such as the installation of building technology systems to Laakso Joint Hospital (EUR 20m) and renovation of three rental apartment building in Helsinki for HEKA (EUR 22m).
Market still challenges on short to medium term
As we expected, Consti kept the guidance for 2024 unchanged and estimates that its EBIT for 2024 will be in the range of EUR 9–12m. After slight adjustments for Q4, we estimate net sales of EUR 323.7m and EBIT of EUR 10.3m for 2024E. Consti doesn’t expect material improvements in the demand outlook for Q4. Going forward, market participants estimate slight volume growth in Finnish renovation market for 2025E. We have revised our growth estimates slightly down due to cautious market commentary from the company. We still expect slight revenue growth for 2025E as we forecast net sales to reach EUR 335m and EBIT EUR 11.9m at a margin of 3.5%. The challenging market conditions will likely still put pressure on achievable project margins in 2025E.
BUY with a TP of EUR 12.5 (prev. EUR 13.0)
Due to the downward estimate revisions, we adjust our TP to EUR 12.5 (prev. EUR 13.0). Consti’s valuation is still modest, with its full potential yet to be realized amidst difficult market conditions.