SRV - Downgrade to HOLD

Operatively slightly better than expected
SRV reported Q4 results, which operatively in fact slightly beat our estimates. Revenue amounted to EUR 336.3m (EUR 316.0m/316.0m Evli/Cons.) while the operative operating profit amounted to EUR -4.6m (Evli EUR -5.5m). The operating profit however fell below expectations to EUR -11.5m (EUR -5.5m/-0.8m Evli/cons.). SRV also wrote down the entire value of its holdings and receivables relating to the shopping centre 4Daily, due to weak occupancy rates and profitability, which had an EUR 6.1m negative impact on financial expenses. The company estimates revenue in 2022 to amount to EUR 800-950m and operative operating profit to improve on 2021. The profitability guidance could have signalled more strength but reflects the current market uncertainties.

Profitability potential but also uncertainties
We now expect revenue of EUR 863.8m (prev. EUR 938.5m) and operative operating profit of EUR 21.0m (prev. 29.1m). We expect revenue to decline within housing construction given the still low number of developer contracted housing unit start-ups. Uncertainty relating to profitability development is quite high. Development could be substantial y/y, as the implied underlying profitability excl. the Tampere Areena project in 2021 would have been fair. The situation with construction material pricing and availability however still poses a risk. Lower volumes and fewer expected potentially higher margin developer contracted housing unit completions are also to be taken into consideration.

HOLD (BUY) with a target price of EUR 0.54 (0.60)
On our lowered estimates and the prevailing geopolitical uncertainties and additional shopping centre woes we see that the potential realization of valuation upside from exits and profitability improvement is currently beyond grasp. We lower our target price to EUR 0.54 (0.6) and rating to HOLD (BUY).