LapWall - Near term uncertainty masks the potential
LapWall releases its Q3 business review on the 29th of October. We expect relatively steady development despite the challenging market. In addition to the figures, our focus lies on order development and market commentary.
Market has bottomed out, slow recovery ahead
According to The Confederation of Finnish Construction Industries RT estimate, residential construction volumes will fall 26% in 2024 with total Finnish construction volumes declining 7%. In 2025, residential construction is expected to grow 15% y/y, while overall construction volumes are expected to grow 4%. The y/y growth is estimated to be relatively fast, yet it is coming from a low base. The detached house starts are expected to be 3 500 units in 2024 while RT estimates 4 500 starts in 2025, still far from the levels seen during 2020-2022. While still relatively low absolute levels, the volume growth in both residential and non-residential construction should support LapWall already in 2025E.
Relatively steady development expected in Q3
We have marginally raised our estimates ahead of the Q3/24 business review. We now project net sales to be EUR 44m and EBITA to be EUR 4.4m for FY 2024E. For Q3/24, we predict net sales of EUR 10.7m (prev. EUR 10.2m) and EBITA of EUR 1.0 million (EUR 0.9m) due to anticipated steadier earnings across the remaining quarters. Backlog was down to EUR 15.8m at the end of H1 vs. EUR 23.0m last year. We expect a slight y/y revenue decline overall for the second half of the year. Regarding the roof element segment, the company's significant project in Äänekoski (valued at EUR 6.5m) was finished in early H2/24. As a result, we anticipate slower y/y sales development since the project contributed to revenue during the comparison period of H2/23 (contract confirmed in 9/23). We estimate improved net sales development for the Pyhäntä unit in H2 as we project growth to continue in the roof element system segment while the wall element segment continues to face easier comparable figures.
BUY with a TP of EUR 3.8
The current pricing remains undemanding, reflecting the short-term uncertainty. While the potential profit warning presents a short-term risk, we still see the long-term potential high.