Mixed upside potential, despite market recovery expectations

Pent-up demand and falling interest rates remain the backbone for newbuild recovery expectations. However, as the recovery has not yet started, property developers screen as the most attractive long-term, but visibility remains mixed. Diversified construction companies are more attractive on near-term P/Es, although many seem to be fully valued on solid share-price performance over the past six months. We maintain a neutral sector view; NCC and Skanska are our top picks.

Some early signs of improvement

NRC Group (Hold, TP: NOK4.50) - Results will speak for themselves

With its weaker-than-expected Q4, NRC Group reiterated its 2025 guidance for revenue of NOK7bn and an adj. EBIT margin above 2%. However, as the company has missed its revenue guidance and EBIT margin targets for seven years in a row (2018–2024), we await evidence of an EBIT margin recovery. We remain cautious, and believe NRC is a high-risk/high-reward investment case, with ample upside potential should it reach its EBIT margin targets. We reiterate our HOLD, but have cut our target price to NOK4.5 (5).

Flerie (Buy, TP: SEK57.00) - Entering tougher times with care

Entering tougher times with care Q1 saw a 6% decline QOQ in Flerie’s NAV, as FX movements and valuation overshadowed progress across its portfolio (e.g. positive results for Lipum and AnaCardio). We have lowered our target price to SEK57 (68) to reflect a more challenging environment for early-stage life science assets, but reiterate our BUY as we continue to like the diversified, conservatively valued portfolio and the share redemption scheme at NAV (set for end-Q2). Flerie is set to take listed holding Toleranzia private subject to AGM approval, which should improve funding conditions agains...

VEF (Buy, TP: SEK2.50) - Executing on exits and buybacks

Q1 saw 1% NAV growth QOQ in USD terms, as operational progress and FX effects (mostly relating to the BRL) offset multiples contraction. We are encouraged by the recent partial exit of Juspay at a 37% IRR, 4x CoC and valuation in line with NAV, and see further near-term upside potential in this name. We have cut our target price to SEK2.5 (2.9), mainly on the USD headwind versus the SEK, but reiterate our BUY, as we still see scope for a re-rating from continued exits, deleveraging and the recently announced buyback programme.

Nordea (Buy, TP: SEK155.00) - Resilient returns at a discount

Nordea’s Q1 was a robust quarter, with a resilient >15% ROE on a strong capital position (200bp management buffer) underpinning Nordea’s widening ROE lead versus its peers. We have raised our 2025–2027e EPS by 3–4% and our target price to SEK155 (148). Nordea is trading at a c15% P/E discount to its Swedish large bank peers, which we find unjustified given its superior ROE versus the peer group. We reiterate our BUY.