LapWall - Strong progress despite the headwinds
LapWall’s Q3 was strong as the company was able to improve margins through volume growth leading to improved capacity utilization which was coupled with fixed cost reduction. With short-term uncertainty reduced, we increase our TP to EUR 4.2 while keeping rating at BUY.
Strong Q3 in a tough market
LapWall’s Q3 was strong as revenue grew 6.9% to EUR 11.7m, up from EUR 10.9m the year prior driven by continued volume growth. The company’s profitability improved at faster pace as EBITA increased 65.5% to EUR 1.7m, up from EUR 1.0m the year prior, with a margin of 14.3% (Q3/23 9.2%). The profitability improvement was driven by volume growth and increased capacity utilization. In addition, the company has been able to reduce its fixed costs and improve efficiency of its production. The profitability improvement has been especially noticeable in the Pyhäntä unit where the profitability has increased substantially from 2023. LapWall’s backlog declined 27% y/y to EUR 15.2m, the company was able to secure new orders worth roughly the quarter’s net sales. The comparison period’s backlog included one larger, EUR 6.5m order.
Market continues to challenge in 2025E
Prior to release of the Q3 business review, the company revised its guidance for 2024. LapWall now expects net sales of EUR 43-44.5m and EBITA of EUR 4.9-5.2m for the year. With the strong Q3 results and our estimate of continued profitability improvement in Q4, we now estimate net sales of EUR 43.9m and EBITA of EUR 5.0m for 2024E. For 2025E, we have slightly decreased our estimate for net sales due to the still gloomy housing construction development. Although we anticipate slower growth, we are now forecasting higher margins for 2025E due to enhanced profitability in 2024, which we believe will remain sustainable in the future. The ramp-up of the new capacity in Pyhäntä creates some uncertainty to estimates in short to medium term yet is a growth driver in the long-term.
BUY with a TP of EUR 4.2 (prev. EUR 3.8)
The updated guidance alleviates the short-term risk. LapWall is currently priced at approximately 11-10x EV/EBITA based on our estimates for 2024-2025E. We still consider the current pricing conservative as the earnings remain depressed by the market environment and the company’s full potential is yet to be realized.