Consti: Order backlog declines showing – Evli research

Below our optimistic estimates, good cash conversion

Consti’s Q1 results were below estimates but quite in line with company expectations. Revenue declined more than expected, 19.7% y/y, to EUR 59.0m (EUR 64.7m/67.9m Evli/cons.). EBIT was below our estimates as a result of the lower revenue and admittedly also our overly optimistic estimates, at EUR 0.5m (EUR 1.9m/0.4m Evli/cons.). Conti’s cash conversion remained solid (LTM cash conversion ratio 105.7%) and free cash flow amounted to EUR 2.0m. The order intake development was positive and amounted to EUR 62.1m, with the order backlog at EUR 202.2m (-14.9% y/y).

Some headwind seen in new projects

We have lowered our estimates based on the perceived new revenue level after the high volumes in 2019 and Q1 figures. We now expect revenue of EUR 271.9m (prev. 282.3m) and EBIT of EUR 7.6m (prev. 10.1m) in 2020E. The coronavirus pandemic has so far had a limited impact on Consti, as worksites have been able to be kept open. Negotiations for new renovation projects have been successful, for instance a EUR 11.3m school renovation project. Some projects in the negotiation stage have however been cancelled and the start of some projects have been postponed. Our estimates currently only include a limited impact of the pandemic.

HOLD with a target price of EUR 7.0 (7.2)

On our revised estimates we adjust our target price to EUR 7.0 (7.2), valuing Consti at ~10x 2020E EV/EBIT, and retain our HOLD-rating. Uncertainty is elevated by the pandemic and the St. George arbitration proceedings, which saw the time limit for delivering the final arbitration award extended to June 2021.