SRV - Making steady progress
SRV's Q1 figures aligned with our estimates. The order backlog remained at healthy levels, primarily consisting of non-residential contracting projects. First developer-contracted residential project since 2022 was started in Q1, yet we consider additional starts during H1 to be unlikely.
Estimates in line, steady backlog
Revenue in Q1 was EUR 161.4m (EUR 167.0m in Q1/24), slightly below our estimate of EUR 167.5m. Revenue declined 3.3% y/y. Non-residential revenue was well in line with estimates while residential net sales were still at lower levels despite higher number of contracted units under construction. The operative operating profit in Q1 amounted to EUR 1.1m (EUR 1.3m in Q1/24), in line with our estimate of EUR 1.1m. There were no major surprises in the cost base. Reported EBIT was lower at EUR 0.7m due to expert fees related to the sale of the Pearl Plaza shopping centre (effect EUR -0.4m). Order flow remained positive as SRV signed new agreements worth EUR 140.9m (EUR 136.4m in Q1/24) and backlog was at EUR 1043m, steady both q/q and y/y.
Story remains unchanged
SRV kept its outlook for 2025 unchanged as it expects net sales of EUR 630-710m and operative EBIT to be positive. We retain our net sales estimate at the top of the given range at EUR 703.3m. For profitability, we expect operative EBIT of EUR 8.9m as the project portfolio composition remains unchanged. The company was able to launch construction of one developer-contracted project during the first quarter with total of 53 residential units. For 2026E, we estimate net sales of EUR 785.6 with EBIT of EUR 17.4m. Reaching our estimate for 2026 requires a pick-up in developer-contracting and development project volumes. For developer-contracting, we see further starts rather unlikely during H1. The company has developer-contracted projects in pre-marketing in Espoo, Tampere and Turku (total units 172, of which ~15% reserved, we expect approximately 50% reservation rate for construction to commence). SRV has currently 95 residential developer-contracted units unsold. We expect that the company can unload part of the unsold units already during H2/25 and H1/26.
REDUCE with a TP of EUR 5.0 (prev. EUR 4.8)
Valuation appears neutral for 2026E, with EV/EBIT declining to 11x based on our estimates. We base our TP on peer group multiples and our discounted cash flow model. We revise TP to EUR 5.0 after slight estimate adjustments and due to higher peer group multiple levels. Outlook remains uncertain while reaching our estimates for 2026E requires a slight uptick in the market.