Develia: lighten the load, lift the pace (BUY - initiation of coverage)
We initiate coverage of Develia with a BUY and a price target (PT) of PLN 9.9. Develia is one of Poland’s largest listed residential developers, operating in major urban markets and selling over 3k apartments per year. Following the divestment of its commercial assets, the company has a strong balance sheet (0.7x ND/EBITDA in 3Q25), enabling both dividend payments (7.4-9.3% dividend yields expected in 2025-27E) and further expansion, with a target of 4.5k apartment sales in 2028E through a combination of organic growth and acquisitions (Nexity, BIP). Expected demand growth, supported by interest rate cuts, should be favourable for developers – especially those active in the largest cities – boosting sales (we see an 18% revenue CAGR in 2024-27E). On the other hand, we expect a gross margin normalisation (to 27% for Develia) as the benefit of the cheap land ends and apartment prices continue to flatten. Nevertheless, we forecast an 11% net income CAGR in 2024-27E. Develia is trading at 4-9% discounts vs. its peers on the 2025-27E EV/EBITDAs (6.3-7.7x), at 18-21% premiums on the 2026-27E P/Es (7.2-9.0x), and at 15-17% discounts on the 2025-27E P/BVs (1.6-1.9x). We see the P/E premium as justified, given the company’s healthier balance sheet and its concentration in the largest cities, which benefit from stronger demographic trends.Develia SA Formerly known as Lc Corp. S.A.. Develia SA, formerly known as LC Corp SA, is a Poland-based holding company engaged in the real estate development operations. It is involved in the acquisition, management, rental and sale of commercial and residential properties located in such Polish cities as Warsaw, Wroclaw, Krakow, Lodz, Gdansk and their surroundings. Its main development projects in the commercial properties area include Arkady Wroclawskie shopping and retail complex in Wroclaw, as well as an office complex, Wola Center in Warsaw. In the area of residential investment it develops apartments houses Przy Promenadzie, Rezydencja Kaliska and Powstancow 33 in Warsaw; Maestro and Vratislavia Residence in Wroclaw; Debowa Ostoja in Lodz; as well as Niepolomicka and Srebrena in Gdansk. The Company owns 99.95% stake in LC Corp Invest XV Sp z o o Investments SKA. and 100% stake in Sky Tower SA, in the the Netherlands.
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