Dom Development: volume growth, margins stronger for longer (stays BUY)

After the excellent 2023 (3.9k units sold, PLN 2.6bn in revenues and a 30+% ROE, with just PLN 131m of net debt), we believe that Dom Development (Dom) is en route to another good year. Construction costs are stable and prices are still trending up, albeit at a slower pace than last year, when we saw offer prices for new apartments rise 14-22% yoy in major Polish cities, according to JLL. This means that we could see strong margins for longer, with possible upside to the already-high GPM of recent years. Most importantly, volumes are growing, driven by the regional markets into which Dom expanded during the last decade. We forecast the company to sell 4.5k units in 2024E. While well above the run-rate of recent years (2021-23 average of 3.7k units sold p.a.), we believe that our forecast still leaves room for upside. If the year goes according to Dom’s plans, there could be some 10-15% upside to this figure, in our view. The still-strong margins and highest-ever annual sales mean that we expect to see record-high earnings in 2024E, with revenues north of PLN 3bn and profits at PLN 500-600m. We see upside to the Bloomberg consensus, and believe the earnings and dividends growth could extend the good performance of the shares. We maintain our BUY rating, increasing our 12M price target (PT) to PLN 218/share.