SRV - Prospects remain muted for 2025
SRV reports its Q4 figures on 6th of February. We expect slight improvement in adj. profitability year-on-year for Q4. The year 2025 looks rather similar to 2024 as non-residential remains on the driver’s seat. After incorporating the asset sale and other adjustments to our model we revise our TP to EUR 5.2 and update our recommendation to ACCUMULATE (prev. HOLD) to match the updated rating methodology.
Residential market continues to be on a standby mode
The volume of Finnish building permits granted has kept declining y/y during 9-11/2024. In addition, the housing market remains muted as the number of transactions remain low especially in terms of new builds. On the other hand, there are some preliminary signs of a pick-up in the market as the Q4 transaction volumes were already closer to the long-term average levels based on data by the Federation of Real Estate Agency. According to SRV’s website, the company has two residential developer-contracted projects in pre-marketing and 7 projects in the planning stage. Among the projects currently in the pre-marketing phase, a project in Espoo consisting of 53 apartment units has achieved a reservation rate of nearly 50%. On the non-residential front, SRV announced three larger projects and released that it has been selected as a partner to develop the Garden Helsinki project.
Project mix to remain largely the same in 2025
We estimate net sales of EUR 733m and operative operating profit of EUR 10.2m for 2024E. We expect y/y revenue growth for Q4/24 driven by continued growth in non-residential while we expect residential net sales to decline. For Q4 operative EBIT, we forecast EUR 3.0m with margin of 1.5%. Although we project revenue growth, we anticipate that profitability will remain comparable to last year's figures due to the project mix. We expect positive NRIs to boost reported EBIT related to the company’s sale of remaining stake in Pearl Plaza. For 2025E we estimate similar development to 2024, yet we expect that the company is able to sell some of its unsold residential inventory. With non-residential driven project mix in 2025, the margin potential remains limited.
ACCUMULATE (prev. HOLD) with a TP of EUR 5.2 (prev. EUR 5.0)
The current pricing is neutral based on our estimates for 2025E, yet the potential beyond 2025 remains high. After incorporating the asset sale and some minor adjustments to our estimates we revise our TP to EUR 5.2. We update our rating to ACCUMULATE (prev. HOLD) to match the updated rating methodology (see p. 3).