Consti - Earnings growth remains a challenge
Consti’s Q4 was roughly in line with our estimates as net sales were a touch higher and profitability slightly lower than we expected. The outlook indicates limited earnings growth potential for 2025E, yet the valuation doesn’t set the bar high.
Figures roughly in line, order backlog decreases
Net sales in Q4 were EUR 92.3m (EUR 86.1m in Q4/23), only slightly above our estimates (EUR 89.3m). Building Technology business area delivered even stronger growth than we had expected. Operating profit in Q4 amounted to EUR 3.6m (EUR 3.9m in Q4/23), slightly below our estimate (EUR 3.8m) at a margin of 3.9% (Q4/23: 4.5%, Evli: 4.2%). The order backlog at the end of Q4 was EUR 240.1m (EUR 270.0m in Q4/23), declining 11.1% y/y. Order intake was EUR 67.2m in Q4 (Q4/23: EUR 91.6m). While order backlog declined, we see that it is still at relatively healthy levels considering the market environment. In relative terms a larger and in absolute terms a slightly smaller share of 12/24 will be recognized within the next four quarters compared to 12/23 backlog.
Tight competition likely to continue to hinder profitability
Consti kept its guidance identical to the guidance for 2024 as the company expect EBIT to be in the range of EUR 9-12m in 2025. We have revised our estimates for 2025E downwards as prior to the Q4 print we estimated EBIT of EUR 11.8m for 2025E. We still expect earnings growth, albeit at slightly slower pace. Our estimate for slightly increased profitability is based on the anticipated improvement in sales mix and gradual sales growth. We expect that the higher share of Housing Companies business area sales will have a positive effect on relative profitability also going forward. According to our understanding, the company’s profitability was affected negatively in 2024 by increased competition, increased allocation of resources in to tendering and negotiation activities and sales mix. While we expect sales mix to start to help profitability this year, we estimate that the increased competition will continue and therefore the company’s 2025 result will still be far from the potential.
BUY with a TP of EUR 12.5
Consti is priced at EV/EBIT of 7-6x and P/E of 10-9x based on our estimates for 2025-2026E. The company is currently priced at a significant discount to both its peers and its own historic multiple levels. In addition, the company’s stock provides dividend yield of approximately 7% for the coming years.