Veidekke (Hold, TP: NOK110.00) - Higher profits on lower volumes; M&A potential in 2021e
Veidekke reported Q4 sales 4% below our forecast, while EBIT was 55% above our estimate and 34% above Infront consensus. The beat seems to reflect project completions and a reversal of conservative profit recognition in 2020. The order backlog has prompted us to reduce our 21-23e revenue forecasts, but our raised EBIT margin forecasts have led to only minor EPS estimate changes. While the dividend yield looks attractive, the stock is still trading at a premium 2021e P/E versus peers. However, with a too-large balance sheet in our view , we see M&A growth potential. We have upgraded to HOLD (SELL), and raised our target price to NOK110 (100).Veidekke is a Scandinavian construction and property development company. Co.'s segments are grouped according to activity. The construction segment comprises mainly the construction of buildings and infrastructure. The property segment comprises the development of sites, property development and the sale of property (primarily residential). The industry segment comprises the production of aggregates (crushed stone and gravel) and asphalt, the laying of asphalt and road maintenance.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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