LapWall - All the elements for success
We initiate coverage of LapWall with a BUY-rating and TP of EUR 3.8. The sluggish residential construction market at present offers a buying opportunity as the company's valuation seems modest considering the cycle-low earnings.
Europe’s largest wood element manufacturer
LapWall is a Finnish building materials manufacturer that produces prefabricated wooden construction elements for both residential and non-residential buildings. It has production facilities in three locations in Finland: Pyhäntä, Pälkäne and Veteli. LapWall’s offering is based on its proprietary LEKO® element system. The element system includes roughly 50 different standardized wood element products. LEKO® system covers the whole element delivery chain from design to installation. The company faces its strongest competition from alternative building materials in the non-residential construction driven roof element market. Our analysis shows that LapWall is the clear technological leader in the wooden wall element segment.
Short-term estimate risks, long-term profitable growth
LapWall’s H1/24 figures met our expectations, yet the order intake fell slightly short. Consequently, our 2024 estimates are at the lower end of the guidance range. The roof element business will face tougher comparisons in H2/24, yet we anticipate growth from the Pyhäntä unit driven by expected continued growth in roof element system volumes. The ongoing investment into the Pyhäntä factory should expand LapWall’s capacity efficiently to match the projected increasing demand. With increased capacity, recovering demand and lower industry capacity, we foresee profitable growth for 2026-2030E as the market stabilizes and LapWall is set to gain market share.
BUY with a TP of EUR 3.8
We believe that the current short-term uncertainty masks the long-term potential. With our estimates for 24-25E, LapWall is priced at 12-10x EV/EBITA and 13-11x adj. P/E. We find the current valuation levels undemanding considering the cycle-low earnings. The current pricing offers a discount compared to our European small and mid-cap building materials peers and the fair value derived from our DCF analysis.