Projektengagemang's (PE) Q2 numbers confirmed two things: 1) that it is still not fully through the market downturn, and 2) that the Q1 profitability was not a one-off, as we saw a significant improvement again. Sales was down 10% y-o-y but EBITA improved to SEK 15.7m (6.4m), for a margin of 7.4% (2.7%). Q2 sales of SEK 211m was 5% below ABGSCe as the FTE development was below our expectation. However, management said during the conference call that it has seen signs of a better market ahead in its architecture division, which is usually early in the business cycle. EBITA was 11% below ABGSCe, but we learned during the call that PE makes accruals for the staff costs to cancel the calendar effect on a quarterly basis. That was news to us as we expected an uplift from the calendar in Q2.
Lower sales, but increased profitability assumptions
We make cuts to our FTE forecast on the back of the report, but still believe in a recovery as we have seen expectations from architectural firms improving of late as reported by the Swedish NIER. It results in lower sales for '24e-'25e (by 4-5%). In terms of profitability, we feel more confident now that the improvement we saw in Q1 was not a one-off event and have increased our assumptions for H2e and '25e. In total, we raise EBITA by 3%-1% for '24e-'25e.
Fair value range adjusted to SEK 13-24 (12-23)
We raise our fair value range slightly to SEK 13-24 (12-23) to reflect our positive earnings revisions. The recovery to sales growth will probably be a story for '25e, but with profitability now clearly improved it was clear that management will shift focus to having more of a growth mindset. The new CEO will play a key role in this as he starts his journey with PE in August.
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