SRV - Non-residential momentum continues
SRV reports its Q2 results on Thursday 18th of July. We expect continued y/y revenue and order backlog growth driven by non-residential momentum. Our main interests in the report lie in order development, outlook and profitability of the non-residential project portfolio.
Strong flow of orders during Q2
During the second quarter, SRV added multiple larger, mainly non-residential, projects into its backlog. In total, new orders worth nearly EUR 300m were announced and added to backlog. The majority of the projects are estimated to start during the second half of 2024 or early 2025 and expected to be finished during 2026-2027. Two of the largest published new orders that have been added to backlog during Q2 are the construction of a multipurpose building to Suutarila and a health and wellbeing center to Myllypuro, Helsinki. In addition, SRV has been selected as an alliance partner for the construction of the Kuopio Main Police Station which will be entered into backlog after the financial decision on its construction has been made.
Slow resi market showing some early signs of improvement
Some early clues of a better residential market emerge, though data on housing loans and building permits remain bleak. Prices of old dwellings in housing companies have started to increase from the lows seen at the start of the year. In addition, the Finnish construction confidence seems to have bottomed during Q4 of last year. Although there are some signs of recovery, we estimate that SRV’s 24-25E volumes are driven by the company’s non-residential backlog. We currently project that the developer contracted housing will not add to revenue until 2026E at the earliest (excl. sold completed units). Overall, we maintain our estimates mostly unchanged ahead of the Q2/24 report.
HOLD with a TP of EUR 5.2 (prev. EUR 4.3)
The company’s strong non-residential momentum is set to continue. While the valuation remains elevated on our 2024E estimates, it looks already attractive on our estimates for 2025-2026E. With the positive start to the FY, improved controllability of projects and continued good order inflow, we increase our TP to EUR 5.2 (prev. EUR 4.3), while keeping rating at HOLD.