EUR 850.00 For Business Accounts Only

Morningstar | Another Solid Performance for Vinci in First Half

Narrow-moat Vinci continued to report consistently strong results, with first-half EBIT moderately ahead of our expectations in all business lines. First-half EBIT for the group was EUR 2.1 billion, up 11% over the prior-year period. We don’t expect to make a material change to our forecasts or our EUR 78 fair value estimate. Vinci’s consistent performance in recent years has been fully recognized by the market, and shares are trading at a modest premium to our fair value estimate.

The concessions business is as solid as ever. First-half EBIT was up 7% over 2017 with a 40-basis-point increase in margin. Traffic on the autoroutes remains robust with a 2.3% increase in the first half, but we will likely retain our conservative outlook. We think growth will struggle to stay above the 2% level, given rising fuel prices, which will dampen light-vehicle traffic. Outperformance will likely depend on heavy-vehicle traffic, which is now at buoyant levels with the economic recovery in Europe. However, with heavy-vehicle traffic levels now above the precrisis peak, further gains will be more difficult.

The contracting business appears to be gaining momentum with first-half EBIT increasing 25% over 2017, although acquisitions contributed a good portion of the gain. In any case, organic growth was 2.2%, the order book was up 12%, and some margin improvement was finally apparent in Vinci construction. Improvement in the French construction market remains critical to our thesis, and first-half results supported this view. Contracting revenue in France increased 4.1% on a like-for-like basis, and reservations at Vinci Immobilier rose 4%.