Sales miss, solid underlying activity

Recovery in the making

Mixed upside potential, despite market recovery expectations

Pent-up demand and falling interest rates remain the backbone for newbuild recovery expectations. However, as the recovery has not yet started, property developers screen as the most attractive long-term, but visibility remains mixed. Diversified construction companies are more attractive on near-term P/Es, although many seem to be fully valued on solid share-price performance over the past six months. We maintain a neutral sector view; NCC and Skanska are our top picks.

Bonava (Hold, TP: SEK10.00) - New but recycled targets

Bonava hosted a CMD on 27 March. While focus was on the expected market recovery, it announced ‘new’ financial targets (recycled old ones), in which the EBIT margin and ROE targets refer to new POC accounting starting in 2025, rather than formal IFRS figures. While recovery was the underlying theme, we do not expect it to be reflected in the Q1 results. We reiterate our HOLD and SEK10 target price.

CMD with many positives

Bonava (Hold, TP: SEK10.00) - Another chance to convince

Bonava is due to provide an update on its business plan and strategy at its CMD in Stockholm (27 March). So far, it has not met the financial or operational targets presented at its last CMD, and we note its history of changing its targets; we believe it will be down to results to convince. With our expectation of negative EPS for 2025–2026, and a potential recovery in 2027, we continue to find a better risk/reward elsewhere in the sector. We reiterate our HOLD and SEK10 target price.

Setup too great to ignore

Bonava (Hold, TP: SEK10.00) - KPIs lead the way

As we expected, Bonava’s Q4 results reflected the low cycle in the housing market. While adj. EBIT was 3% above our estimate and 11% above Infront consensus, it was down 38% YOY. We are concerned that 2025e and 2026e EPS will be negative due to a low cycle due to few deliveries. However, we expect key performance indicators (KPIs), such as sales and starts, to recover, just as they did in Q4. We believe there is still upside potential in the stock in a normalised housing market. However, the rec...

Margins a potential game changer

Strong on all fronts

Wide peer valuation range on market recovery expectations

Various waves of expectations for a recovery in newbuild markets have led to volatility in the sector, but an upwards share-price trend overall. Although we still await proof the new-volume market (both residential and commercial) is recovering, consensus is fuelled by falling rates. However, trailing profits under IFRS valuations are record-wide. We maintain a neutral sector view and stock-picking approach.

Late-cyclical pick

Bonava (Hold, TP: SEK9.00) - Weak Q4e, but KPIs a bright spot

Bonava announced four investor deals in Q4, implying 2024 investor sales of SEK1.8bn (573 homes), up 129% YOY. While this is still low in an historical context, we note the market has started to recover. Nevertheless, we expect profits to remain weak in our forecast period. We forecast Q4 EPS of SEK0.38, down 79% YOY. We reiterate our HOLD and SEK9 target price.

Improvement from a low base

Strong cash flow

Time to sell the inventory

KPIs and profits reflect cycle-lows

While the sector has rallied on expectations of a recovery in Nordic CRE and residential starts, there are no signs of an actual recovery yet. With our base case still for a gradual sales recovery in 2026, our longer-term estimates remain below consensus, reflecting slow profit-recognition under IFRS – the latter also underlies our expectation of declining revenues and EBIT YOY in Q3 for several names we cover. Our sector top picks are still Skanska, NCC and Veidekke, while we see downside risk ...

Bonava (Hold, TP: SEK8.50) - Q3 likely to be weak

We expect a KPI recovery for housing starts and sales from a low base; however, with few completions, we forecast a weak Q3 EPS of SEK-0.42 (results due at c07:00 CET on 24 October). We have cut our 2024e EPS after Bonava announced a SEK60m impairment in a deal with OBOS in Gothenburg, and we see scope for more impairments with a potential Finnish operation divestment. We reiterate our HOLD on the low valuation but few near-term catalysts, but have reduced our target price to SEK8.5 (9).

Bonava (Hold, TP: SEK9.00) - Delayed earnings recovery

While Q2 nominal EBIT was low, as expected, rising financial costs resulted in EPS well below our forecast and Infront consensus. Moreover, KPIs (started and sold units) were significantly below our expectations, which in turn delayed our expectation of an earnings recovery. This and our updated financial cost estimates mean we have cut our 2024–2026e EPS. Given the low P/B of 0.4x, we believe many of the negatives and low expected profits in the coming years are reflected in the current share p...

Enough for a positive reaction