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- SRV - Moving towards positive profitability
SRV - Moving towards positive profitability
Q3 slightly better than anticipated
SRV’s Q3 revenue came in at EUR 208.4m (Evli 216.8m), while the operative operating profit amounted to EUR -3.1m (Evli EUR -6.9m). The revenue was mainly in line with expectations but fell short of our estimates in business construction in Finland. The profitability beat was mainly due to the negative impact of the REDI project being smaller than we had anticipated. SRV’s order backlog remained solid at EUR 1,678.5m, up 9.3 % y/y. SRV made agreements for releasing capital tied on the balance sheet for approx. EUR 50m, of which around EUR 20m will materialize in Q4 along with an additional goal of EUR 20-30m.
Estimates revisions minor
We have made minor changes to our estimates, with our 2018E revenue and operative operating profit figures at EUR 959.3m (prev. 960.5m) and EUR -2.3m (prev. -5.2m). SRV expects revenue in 2018 to decline compared to 2017 (EUR 1,114.4m) and the operative operating profit to be negative. We have also checked down our 2019E sales growth estimates by approx. 2 percentage points, mainly in business construction in Finland.
HOLD with a target price of EUR 2.4 (2.7)
On our estimates SRV trades at EV/EBIT and P/E 2019E of 10.8x and 7.7x respectively. SRV trades at a discount to peer P/E 2019E multiples, which we currently consider reasonable following the profitability issues. We retain our HOLD-rating at a target price of EUR 2.4 (2.7).