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Consti - Steady progress, favourable valuation

Consti is the leading renovation construction company in Finland. Despite facing an uncertain market with rising building costs, the company has been able to successfully turnaround and maintain its profitability. We continue to see the valuation rather undemanding and the discount to its main peers unjustified. We retain our BUY-rating and adjust our target price to EUR 12.0 (11.0).
Finland’s leading renovation construction company
Consti is a construction service company focused on renovation construction and building technology contracting and services. The company operates solely in Finland with a focus on Finnish growth centers. Consti is the largest renovation construction company in Finland measured by revenue and the company’s building technology unit is the 5th largest building technology company in Finland.

Turnaround achieved amid uncertain market
During 2017-2018, Consti experienced challenges with project execution and management that resulted in negative earnings. Due to the suboptimal profitability, the company implemented corrective measures that began to show results already in 2019. The company has posted over 3% adjusted EBIT margin during 2020-2021. In 2022, the company has been able to maintain its profitability despite the rising construction material costs. In our view, the company’s long-term profitability target of 5% EBIT margin is ambitious but we see potential for improvement through fixed cost containment, optimization of the sales mix, and improved project management and procurement.

BUY with a target price of EUR 12.0 (11.0)
We see the case attractive despite the current construction market uncertainty and the recent share price strength. In our view, the company’s valuation discount to its new construction focused peer companies is unjustified. We also see a strong long-term upside potential if the company can reach its long-term operational targets. We retain our BUY-rating and adjust our target price to EUR 12.0 (11.0).  
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