Consti - Margin recovery progressing well

Consti’s Q4 results were quite in line with our estimates, with net sales at EUR 78.3m (Evli EUR 80.9m) and operating profit at EUR 2.8m (Evli EUR 3.0m). We expect sales to decline around 10% in 2020 due to continued weak order backlog development. The new organization along with the related cost savings should absorb the expected lower volumes and we continue to expect clear earnings improvement. We retain our HOLD-rating with a target price of EUR 8.0 (7.0).

Q4 results largely in line, order backlog continued decline

Consti’s Q4 results were quite in line with our estimates. Net sales amounted to EUR 78.3m (Evli EUR 80.9m) and operating profit to EUR 2.8m (Evli EUR 3.0m). Profitability was still slightly affected by the project that had a significant negative impact on H1/19 profitability. Consti’s BoD proposes a dividend of EUR 0.16 per share (Evli 0.17). The order backlog continued to decline and was down 17.4% y/y at EUR 186m.

Expecting sales declines but clear profitability improvement

Following the continued weak order backlog we have lowered our coming year sales estimates by some 10% and now expect a 9.8% net sales decline in 2020. We expect Consti to be able to absorb the volume declines without major margin pressure due to the new organization and related cost savings. We have slightly raised our 2020 EBIT estimate, now expecting an EBIT of EUR 10.7m. The Q4 results in our view provided continued support for the sustainability of Consti’s successful profitability turnaround.

HOLD with a target price of EUR 8.0 (7.0)

On our slightly raised earnings estimates and increased confidence in the profitability turnaround, we adjust our TP to EUR 8.0 (7.0), valuing Consti at ~7.5x 2020E EV/EBIT, with the Hotel St. George arbitration proceeding still warranting the clear discount to peers. We retain our HOLD-rating.

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