EUR 850.00 For Business Accounts Only

Morningstar | Smooth Sailing for Vinci in 3Q; Maintaining FVE

After reviewing Vinci's third-quarter sales update, we are maintaining our EUR 78 fair value estimate and narrow moat rating. At current levels, the shares look fairly valued. Shares are up 4% at time of writing, but we think this is more of a recovery from the broad market sell-off in recent weeks than a positive surprise in performance. Third-quarter revenue was only slightly better than consensus and our expectations. 2018 guidance was confirmed.

Traffic on the autoroutes remained healthy, with a 1.4% increase in the third quarter over 2017. Similarly, airport passenger traffic increased 6% for fully consolidated subsidiaries, and 2.8% for all airports. The lower growth rate for all airports is due to negative growth at the Japanese airports due to extreme weather. Portugal, long the provider of double-digit growth, was up a respectable 4.2% in the quarter. This lower level of growth is in line with our expectations, owing to the high base after several years of very strong performance.

In the contracting business, like-for-like growth was up 4.9% over 2017. Eurovia has good momentum now, as the recovery in French roadwork markets that started in 2017 is confirming in 2018. The future also looks bright for Vinci energies, as the order book is up 20% over 2017. We are still waiting for momentum to build in Vinci construction. Like-for-like sales were down 0.3% in the quarter and order intake fell 6%, as the company was more selective with new tenders. Weakness is outside France now, mainly in areas related to oil and gas. In France, the building and public works market is strong, particularly in Paris.