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Consti - Short-term headwinds mask the potential

Consti’s backlog for 2024 coupled with a robust balance sheet protects it from short-term market turbulence while the long-term case backed by fundamental market trends remains intact. We retain BUY-rating with a TP of EUR 12.0.
Market leader in renovation with a wide service offering
Consti is a construction service company focused on renovation construction and building technology contracting and services. Consti is the largest Finnish renovation construction company with net sales of EUR 321m in 2023. Consti focuses on the Finnish growth centers and majority of total revenue comes from the Helsinki metropolitan area. Consti serves a wide range of customers, both private and public. While it is the market leader in housing company renovations, due to its size and expertise, it can also conduct larger multi-year projects that many of its smaller renovation focused peers are not able to manage. 

Revised strategy targets sales of roughly EUR 400m in 2027
Consti was able to solidify its profitability to a good level during the latest strategy period from 2021 to 2023. With the Q4 2023 report, Consti announced its updated strategy for the strategy period from 2024 to 2027 which builds on the success of the predecessor. Consti aims to have four equally strong business areas with total net sales amounting to roughly EUR 400m at the end of the strategy period. This is achieved by growing faster than the market in both the construction and building technology markets. Consti’s long-term target for profitability stays unchanged at the 5% EBIT margin. We have made only slight estimate adjustments. Our estimates remain below the company’s targets, reaching the net sales target would require a sales CAGR of almost 6% p.a., which is notably higher than the expected market growth, especially given the estimated weaker 2024E.

Undervalued and overlooked
Consti is currently priced at 7-5x EV/EBIT and 10-8x P/E, trading at a discount to both its peer group and the company’s own historic multiple levels. Backing the undemanding valuation, the company’s stock offers an over 6% dividend yield at the current price level based on our estimates going forward. We retain our rating at BUY with a TP of EUR 12.0.
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