SRV - No clear signs of a shift yet
SRV’s Q2 figures fell short of our estimates for both volumes and profitability. Given the specified outlook and low order levels, we have slightly lowered our estimates for non-residential volumes in the second half of the year.
Weak across the board, orders should recover in Q3
SRV’s net sales in Q2 fell slightly short of our estimates as business construction sales fell some 10% to EUR 156.1m while we had expected decline of 7% to EUR 161.0m. In addition, residential net sales were a touch weaker than we forecasted. Due to the lower volumes, operative EBIT decreased to EUR 0.8m (compared to EUR 1.5m in Q2/24), which was also below our estimate of EUR 1.3m. While the operative figures were weaker than expected, mainly due to lower volumes, the main negative in the report was new orders which fell to EUR 37.7m in the quarter (EUR 215.0m Q2/24). With the slow order flow, order backlog contracted to EUR 931.8m (EUR 1067.3m Q2/24). We expect that the slower order development was partly explained by the weaker market and partly by timing effect as the company expects order flow to recover in Q3.
2026 is at risk of becoming another gap year
The residential project started in Q1 in Espoo was the only developer-contracted project commenced during the first half. Little less than half of the units are currently sold and the project should be completed in July 2026. With no further starts in H1, 2026 is starting to look like another year of low developer-contracted completions. The company has few developer-contracted projects in pre-marketing and starts should take place as soon as possible to enable completion and revenue recognition in late 2026/early 2027. On the non-residential side, SRV has been able to successfully bridge the gap towards residential turnaround, yet the backlog has now shown decline for three quarters since the peak in Q3/24. In connection with the report, SRV specified its 2025 outlook and now expects net sales to amount to EUR 630-680m (prev. EUR 630-710m). While the company indicates relatively strong order intake for Q3/25, we have lowered our estimates for H2 non-residential volumes and profitability. We now forecast net sales of EUR 668m and operative EBIT of EUR 7.0m for 2025.
Short to medium term upside remains limited
SRV’s pricing is elevated for 2025-2026E as we model low earnings due to the prevailing project portfolio structure. We continue to prioritize longer term potential in our target price setting. Despite the negative revisions, we maintain TP at EUR 5.0 and rating at REDUCE.