Consti - Showing resilience
Consti’s Q2 results beat our estimates for both net sales and EBIT. The company showed resilience in a tough market as the Building Technology and Public Sector business areas delivered even stronger growth than expected. Despite positive results for Q2, the market continues to be challenging for the rest of the year.
Impressive volume development in a challenging market
Consti’s net sales in Q2 beat our estimates at EUR 82.9m (EUR 75.7m in Q2/23, EUR 75.9m Evli est.), as we expected only slight growth. Growth was even stronger than expected in Public Sector and Building Technology business areas which grew 42.5% and 58.7% respectively. The order backlog at the end of Q2 was EUR 261.2m (EUR 297.9m in Q2/23), down by 12.3% y/y. Order intake was EUR 90.8m in Q2 (Q2/23: EUR 106.5m). While order backlog and intake fell y/y, the company is satisfied with the total number and quality of orders received.
Expecting sales decline for Q3 driven by tough comparison
While net sales growth was strong in Q2, we expect net sales to decline in Q3 y/y driven by tough comparison period Q3/23. For different business areas, we estimate Housing Companies to turn to growth during H2 while we see the Public Sector slowing down vs. the tough comparison of H2/23. We estimate the current strong backlog in Building Technology to continue to deliver growth in H2. For Corporations, we expect relatively flat sales for H2 while for Q3 we estimate a slight net sales decline due to the challenging comparison period. We expect profitability to decline y/y partly due to the gain recognized on the sale of Consti’s property-related relining business in Q3/23 and partly due to the nature of the company’s current project portfolio. All in all, we model practically flat net sales for FY 2024E at EUR 322.2m and EBIT at EUR 10.6m (EUR 12.3m in 2023) with a margin of 3.3% (3.9% in 2023).
BUY with a TP of EUR 12.0
With only minor estimate changes, the valuation remains undemanding. Consti is priced at 10-8x P/E and 7-6x EV/EBIT on our estimates for 2024-2025E.