Consti - Single project still causing troubles
Solid sales growth but earnings still slightly negative
Consti’s first quarter revenue beat expectations, growing 18.0% y/y to EUR 73.5m supported by strong sales growth in Housing Companies. Profitability only just remained negative, with EBIT at EUR -0.4m, with remaining performance obligations relating to a building purpose modification project still affecting results. Pick up in order intake compared to H2/18 aided in pushing the order backlog to a healthy EUR 237.8m. Stricter tendering criteria in Building Technology continued to weigh in on revenue and order backlog but management considers the quality of the order backlog to have improved.
On-going project still casting a shadow on 2019 earnings
With the good growth in Q1 we adjust our 2019 revenue estimate to EUR 337m (prev. EUR 324.1m) while the stagnant order backlog development prompts us to remain cautious on growth in the mid-term. We expect growth above all in the Housing Companies and Public Sector business areas. With the profitability burdening building purpose modification project still on-going (expected completion during Q2/19) we lower our Q2 EBIT estimates while keeping our H2/19 estimates intact for a 2019 EBIT estimate of EUR 5.9m (prev. EUR 7.1m).
HOLD with a target price of EUR 6.0
On our estimates Consti trades in line with the construction company peer group on 2019E P/E but on a significant discount on 2020E multiples. With the profitability burdening on-going obligations and uncertainties relating to Consti’s earnings capacity under a healthier project pipeline, without major negative margin projects, we retain our HOLD-rating with a target price of EUR 6.0