Renovation rules now a reality

The Energy Performance of Buildings Directive (EPBD) was approved on 12 April, requiring the modernisation of existing real estate in the EU, and will soon enter the Official Journal of the EU. Member states will have two years to incorporate the provisions into their national legislation. While Q1 is Nordic construction’s low season due to winter effects, we see some downside risk to Q1e consensus and longer-term to 2024–2026e EBIT on lower development gains. We recommend a stock-picking approa...

Veidekke (Hold, TP: NOK120.00) - Low season ahead

Due to Nordic winter effects, Q1 typically marks low season for Veidekke. We are below consensus on Q1e EBIT, forecasting a low-season nominal loss. We expect reduced long-term civil engineering spending in Norway following publication of the new National Transport Plan (NTP), but with a weaker NOK, our 2024–2026e EPS are broadly unchanged. We have raised our target price to NOK120 (115) to reflect higher peer multiples, but reiterate our HOLD.

Veidekke (Hold, TP: NOK115.00) - Good Q4, but M&A likely needed for EP...

Q4 revenues beat our estimate and consensus, but order backlog was reduced more than expected. In our view, EBIT margins were the biggest positive, exceeding expectations for most divisions. However, with the order backlog down 2% YOY at end-2023, we see limited growth for 2024–2025e. While the EV/EBIT and dividend yield remain attractive, we consider the P/E fair. In our view, the main potential catalyst is a return of EPS growth, driven by M&A. Near-term, we find the valuation fair, and reiter...

Renovation regulation approaching

The ‘trilogue’ process regarding the Energy Performance of Buildings Directive (EPBD) that aims to double renovation rates of commercial and residential properties has been concluded, and the new legislative text is due to be published in spring 2024. Also, the recent pivot in market interest rates has improved the sector outlook, but with long profit lead times. Names with high short interest (JM and SBO) have rallied the recently, but we believe the current valuation underestimates the profit ...

Veidekke (Hold, TP: NOK105.00) - Shy of Q4e consensus on EBIT

While we are in line with Infront consensus on revenues, we are 5% below on EBIT, as we believe the Q4 2022 divestment gain of NOK130m may have raised Q4 2023 consensus despite being a one-off. Announced orders have held up well despite weak markets, and look set to reach an all-time high in 2023. A reduced market forecast has led us to trim our

Political agreement for EPBD

Yesterday evening saw a political agreement and the conclusion of the final trilogue meeting on EPBD revisions. There are some revisions to earlier drafts, but EU member states will now prepare requirements for lower energy building stocks. We believe that once in place this regulation should be a positive for construction companies, but CAPEX for real estate companies.

Veidekke (Hold, TP: NOK105.00) - Q3 beat, but weaker backlog

The Q3 results beat our estimates and Infront consensus, largely due to the Other segment, with a gain on financial assets; hence, a large part of the beat was not operational. However, Veidekke continues to transform in a challenging building market, which boosted EBT above expectations. We have trimmed our 2024e EPS on the weaker-than-expected order backlog and reiterate our HOLD and NOK105 target price.

Veidekke (Hold, TP: NOK105.00) - HOLD reiterated on weak outlook

We see Q3 downside risk, as we are 8% below consensus on EBIT and 7% below on EPS, but in line on revenue ahead of the results (due at 07:00 CET on 8 November). Veidekke faces a weak outlook for private building markets, especially new housing sales. While we view its cash position and balance sheet as strong, we find the valuation fair versus peers based on 2023–2024e adj. P/E and adj. EV/EBIT and see limited upside potential. We reiterate our HOLD but have lowered our target price to NOK105 (1...

Bright spots few and far between

With only three BUYs, we consider bright spots in the sector – just as residential newbuild and commercial development sales in today’s market – few and far between. New housing sales and commercial property markets have been hit by rising interest rates, and the EU’s Energy Performance of Buildings Directive (EPBD) – which holds potential upside – has been delayed. We still prefer stocks with no (or limited) pure residential exposure; our top picks in construction are Skanska and NCC, but, desp...

Northern Lights

Veidekke (Hold, TP: NOK120.00) - Fairly valued in current market

With lower-than-expected EBIT margins in Construction (Norway and Sweden) and Infrastructure – likely due to falling building starts – Q2 EBIT fell 5% shy of our estimate and Infront consensus. Market sentiment towards building and real estate remains weak, and we find the 2023-25e P/E fair after a solid share price performance in recent months. With limited upside potential, we have downgraded to HOLD (BUY). We have cut our target price to NOK120 (125) on forecast revisions.

Northern Lights

Building trouble in the private sector

The building outlook remains grim, with very weak new private housing sales and a tough commercial property market. However, the overall picture is eased slightly by support from the public sector and civil engineering, and a likely renovation wave from the Energy Performance of Buildings Directive (EPBD). However, we still prefer stocks with no (or limited) pure residential exposure, and retain our neutral sector stance. Veidekke and Skanska are our preferred picks in construction, but we expec...

Veidekke (Buy, TP: NOK125.00) - Solid balance sheet and DPS

We are broadly in line with consensus ahead of the Q1 2 results. We like Veidekke’s solid cash position of NOK2.3bn as of end-Q1, which we expect to be NOK2.8bn by year-end on seasonal working capital releases and its strong dividend yield. We reiterate our BUY and NOK125 target price.

Veidekke ASA: 1 director

A director at Veidekke ASA bought 2,562 shares at 101.000NOK and the significance rating of the trade was 68/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years clearly ...

Northern Lights

Veidekke (Buy, TP: NOK125.00) - One-off miss, but high ambitions

The Q1 results fell short of expectations due to the late announcement of a NOK110m dispute settlement relating to the E39 Svegatjørn-Rådal project in Bergen. Excluding this charge, the result was marginally below our forecast for low-season Q1. Despite weak new housing sales in Sweden and Norway, and the bleak commercial property outlook, Veidekke repeated its ambition of a 5% pre-tax profit margin by 2025. While we think this might be too bullish, we still see upside potential and reiterate ou...

Veidekke (Buy, TP: NOK130.00) - Low season to strike Q1e

Due to seasonal winter effects, we expect Q1 EBIT to be fairly close to zero (results due at 07:00 CET on 11 May). We believe the key focus points in the report will be any market comments and the margin guidance. On 30 March, the company presented its Scandinavian construction market outlook, indicating a decline of 8.0% in 2023–2024, in line with our expectation (although our forecasts imply a larger decline in 2023 and a smaller one in 2024). However, based on the reported 108% book-to-build ...

Veidekke (Buy, TP: NOK130.00) - Low season to strike Q1e

Due to seasonal winter effects, we expect Q1 EBIT to be fairly close to zero (results due at 07:00 CET on 11 May). We believe the key focus points in the report will be any market comments and the margin guidance. On 30 March, the company presented its Scandinavian construction market outlook, indicating a decline of 8.0% in 2023–2024, in line with our expectation (although our forecasts imply a larger decline in 2023 and a smaller one in 2024). However, based on the reported 108% book-to-build ...

Residential markets still weak, but renovation wave approaching

With still extremely weak new housing sales, we prefer stocks with no (or limited) residential exposure. We fear residential developers might have to downsize if markets do not recover quickly. The EU parliament has passed the EPBD revisions and the bill is now in a trialogue process – in our view this is a major potential catalyst for a wave of renovation. We retain our neutral sector stance, seeing upside potential in construction and downside potential in residential development. Our top sect...