Peab (Sell, TP: SEK67.00) - Hot and cold

Despite weaker-than-expected EBIT from Property Development (PD) and fewer sales and no starts, Peab beat our overall adj. EBIT forecast and Infront as the Industry segment achieved EBIT above estimates. While we have raised our 2024–2026e EPS by 8.5–2% on the strong EBIT margins in Industry, we remain concerned about the high consensus for PD gains. We reiterate our SELL on the consensus downside risk, but have raised our target price to SEK67 (60) on updated estimates.

Fine Industry results

Peab (Sell, TP: SEK60.00) - High debt, high valuation

Peab announced a solid SE7.2bn in orders in Q2, with several large Civil Engineering jobs. However, we believe the weak housing market remains the main obstacle for normalised ROCE. We are below Infront consensus on 2024–2026e EPS, as we forecast lower Property Development gains. For Q2e, we are 5% below Infront consensus on EBIT, but 11% below on EPS. We believe the housing market recovery will take longer than the market expects, and continue to see a better risk/reward elsewhere in the sector. We reiterate our SELL and SEK60 target price.

Lyko Group (Sell, TP: SEK95.00) - Waiting for further positive signs

For Q3, we are slightly above consensus on EBIT but below on net profit. We expect Lyko’s results to be weighed down by continuously high financial costs. In our view, focus will remain on its European market, the efforts to improve its group gross margin, and the cash flow position (net debt/EBITDA of c4.4x at end-Q2). We reiterate our SELL and SEK95 target price, reflecting its stretched balance sheet and our belief that it will take time to properly balance growth and profitability.

The weekly navigator

From the past week, we highlight: 1) we hosted investor lunches with the CEOs of Svolder and Byggmästaren at our Stockholm office; 2) we met with Investor, which is continuing to execute on its M&A agenda; 3) we met with VEF, which is seeing positive momentum for fintech VCs in its core markets of Brazil and India.

Bilia AB (Buy, TP: SEK150.00) - Recovery likely pushed to 2025

We are cautious ahead of the Q3 report, as a likely recovery in car earnings is pushed to 2025e, while we expect service earnings to be flattish on still-restrained consumer sentiment near-term. Nevertheless, with c+40% EPS growth in 2025e on a forecast new-car market recovery next year, we remain positive on the stock. We reiterate our BUY but have cut our target price to SEK150 (160), mainly on lower estimates.