SRV - Recovery should start gradually this year
SRV releases its Q1/25 report on 30th of April. We expect relatively flat sales and profitability compared to Q1/24 while our interest lies in order development and outlook going forward. Maintaining a healthy non-residential backlog remains essential for bridging the gap to residential recovery.
Residential volumes should return to growth in 2025
According to the latest market outlook from The Confederation of Finnish Construction Industries RT (CFCI), Finnish overall construction volumes declined by 8% in 2024, driven by residential construction where volumes fell 26% y/y. For 2025, CFCI expects that volumes turn to growth with 4% overall growth where residential volumes are expected to lead the turnaround with growth of 10% y/y. Although the market is clearly beginning to recover, the volumes are rebounding from a low base, as Finnish residential construction volumes, according to CFCI, decreased by 36% in 2023 and by 26% in 2024, respectively. Non-residential building construction should turn to growth starting from 2025 like residential, driven by industrial investments into for example defense sector and datacenters.
Some estimate revisions yet big picture remains unchanged
SRV expects FY 2025E net sales to amount to EUR 630-710m and operative EBIT to be positive. We have made slight adjustments to our estimates on quarterly level, yet our estimates remain relatively unchanged on annual basis. We now forecast net sales of EUR 704m (prev. EUR 707m) and operative EBIT of EUR 8.6m (prev. EUR 7.8m). For Q1, we now forecast flat sales as we model only slight net sales decline in non-residential where the order backlog declined y/y in Q4. We estimate a touch weaker profitability as the backlog is even more heavily skewed towards lower risk co-development projects compared to last year. In addition to the figures, our interest lies on the order development and possible comments on the outlook going forward. Given the slow recovery of the residential construction market, it is vital that the company continues to maintain a healthy non-residential order backlog.
REDUCE with a TP of EUR 4.8
With our estimates for 2025-2026E, SRV is priced at 24-11x EV/EBIT. Compared to peer group, the pricing presents a premium on our estimates for 2025E yet looks more neutral on our estimates for next year. After no significant revisions to our estimates, we retain our TP at EUR 4.8 and recommendation at REDUCE.