LapWall - A transformative year ahead
LapWall releases its Q4 result on 6th of February. As the 2024 result is already largely known, our focus lies on orders, market commentary and outlook for 2025. 2025 will be pivotal for LapWall, with new capacity investment completing in the second half, setting up future growth. We retain our TP of EUR 4.2 and update our recommendation to ACCUMULATE (prev. BUY) to match the updated rating methodology (see p. 3).
Residential activity remains low
According to The Finnish Association for Manufacturers of Prefabricated Houses, the prefabricated house sales during the first nine months of 2024 fell slightly from the levels seen in 2023 (Q3: 0% & Q1-Q3: -6% y/y). While the sales volumes are still at low levels, the sentiment is improving as all of the respondent’s expected improvement in the market activity within the next six months. According to forecasts by The Confederation of Finnish Construction Industries RT (CFCI), detached and semidetached house construction volumes should increase more in 2025 than the apartment building construction volumes. In the non-residential side, CFCI estimates volume growth of 2% in 2025. We expect continued good end-market demand for LapWall’s roof elements products where the demand is primarily driven by non-residential construction.
Capacity investment projected to complete in H2
We see this year as a transformative year for the company that sets it up for growth in 2026. LapWall's largest investment in history, amounting to EUR 19 million, is expected to increase capacity in Pyhäntä and should be completed in the second half of 2025. The completion of the investment introduces a degree of unpredictability to our forecasts. We expect that the net sales effect is still minor in 2025 while the ramp-up could introduce some one-off costs. We model net sales growth of 8% in 2025, with a slight recovery in the residential market and continued growth in non-residential construction driven roof element sales. In terms of profitability, we expect EBITA of EUR 5.8m with a margin of 12.1% as increased volumes should materialize in improved profitability.
ACCUMULATE (prev. BUY) with a TP of EUR 4.2
With our estimates largely intact, we retain our TP of EUR 4.2 while we update our recommendation to ACCUMULATE (prev. BUY). Our target values LapWall at 10x EV/EBITA for 2025-2026E which we see as a more neutral level. There is higher long-term potential should growth materialize from the capacity investments in the coming years according to plans.