Insights from the CMD

Thoughts ahead of CMD

Riding on price tailwinds from Q2e

Solid Q1, but with adj. EBIT 3% below due to net recruitments. Fine-tuned sales, but '24e-'26e EBIT down 4-3% on higher opex. Share to benefit from improved organic growth: up to BUY (Hold).

Expectations running ahead

We continue to see upside potential for diversified construction (Skanska, NCC and Veidekke), but downside risk for residential developers (YIT, JM, Peab and Selvaag Bolig) that have rallied on improving market expectations while new housing sales remains lacklustre. We await the adaptation of the recently EU-approved Energy Performance of Buildings Directive (EPBD). We see a mixed picture for EPS ahead of the Q2 reporting season. We keep a neutral sector view, and still recommend a stock-picking approach.

Essity (Buy, TP: SEK330.00) - Capital and targets in focus

We forecast sequentially higher raw materials costs to be offset by lower energy costs and improved underlying volumes, leaving us largely in line with Q2e consensus. We expect focus to be on its upcoming new financial targets and capital distribution following the Vinda divestment. We reiterate our BUY and SEK330 target price, as we continue to find the stock attractively valued at a 2025e P/E of c13.4x.

A merger, a bond exchange offer and other news

KMC (No rec) and Logistea (No rec) plan to combine, with Logisea acquiring all of KMC Properties’ group operations. SBB Norden announced a bond exchange offer. Dios named David Carlsson new CEO. Corem divested SEK107m of properties. Citycon announced the result of a bond hybrid exchange offer. The weighted-average implied EBITDA yields on the stocks we cover are 4.43% for 2024e and 4.83% for 2025e.