AFRY (Buy, TP: SEK200.00) - Market headwinds set to remain

In Q3, low capacity utilisation and weak demand in real estate, parts of Industrial & Digital Solutions (IDS) and Process Industries (PI) weighed on EBITA. However, the Infrastructure turnaround continued. Capacity utilisation was flat YOY excluding PI. We reiterate our BUY but have cut our target price to SEK200 (230) on market weakness in pulp & paper, real estate and IDS.

More questions than answers after Q3

Uncertainty remain after weak Q3

Too much uncertainty, we stay HOLDers

Q3 report on 25 Oct., market data not supportive. Negative revisions, '24-'25e EBITA down 2-3%. We reiterate HOLD, IDS might struggle in this environment.

AFRY (Buy, TP: SEK230.00) - Q3 likely a repeat of Q2

For Q3, we expect similar market and demand dynamics to Q2, with low capacity utilisation in Process Industries (PI) and weak demand in parts of Industrial & Digital Solutions (IDS) weighing on EBITA. However, the infrastructure turnaround looks set to continue, and group capacity utilisation should improve YOY, excluding PI, in our view. We reiterate our BUY and SEK230 target price.

AFRY (Buy, TP: SEK230.00) - Infrastructure turnaround

In Q2, low-capacity utilisation in Process Industries (PI) and weak demand in parts of Industrial & Digital Solutions (IDS) weighed on EBITA. However, the infrastructure turnaround continued, and group capacity utilisation improved YOY excluding PI and timing effects in Energy. We reiterate our BUY and have raised our target price to SEK230 (203).

Not convincing enough

Q2 EBITA +1% vs Infront consensus. Additional weakness within PI creates uncertainty. We lower '24e EBITA by 2% and move to HOLD (Buy).

Q2 was fine but weak orders

Less risk in Process Industries, up to BUY

Q2 report on 16 July, market data show signs of improvement. Minor positive revisions, '24e EBITA up 2%. We upgrade to BUY, valuation supportive.

The power of M&A compounding

AFRY (Buy, TP: SEK203.00) - On track

In Q1, low capacity utilisation in Process Industries (PI) weighed on EBITA, but this headwind should ease from Q2. The infrastructure turnaround continued, and group capacity utilisation improved YOY excluding PI. We expect group capacity utilisation to improve YOY from H2. We reiterate our BUY but have lowered our target price to SEK203 (205).

Sales miss offset by better cost control

Q1 EBITA in line with Infront consensus. Orders up 5% q-o-q gives hope of H2 recovery. We lower '24e EBITA by 1%.

AFRY Minor model adjustments

We have updated our 2024–2026 estimates, owing primarily to higher net financial costs, as we now expect higher interest rates for longer and higher net debt in 2024–2026 following discussions with the company. We do not consider these changes to be material, and we have not changed our BUY recommendation. We reiterate our SEK205 target price.

AFRY (Buy, TP: SEK205.00) - Infrastructure turnaround

We have upgraded AFRY to BUY (HOLD) and raised our target price to SEK205 (170) on our expectation of an Infrastructure division turnaround. For Q1, we see similar market and demand dynamics to Q4. We expect solid demand across most segments to offset weakness in real estate, pulp and paper, and parts of Industrial & Digital Solutions, supporting 3% sales growth YOY, but with market headwinds weighing on profitability.

AFRY (Hold, TP: SEK170.00) - Potential Infrastructure turnaround

We have upgraded AFRY to HOLD (SELL) and raised our target price to SEK170 (110), following the Q4 results, given that a turnaround of the Infrastructure division seems more likely near-term. In Q4, Infrastructure’s profitability improved due to better capacity utilisation; meanwhile, AFRY appeared better at mitigating weak end-market demand by increasing exposure to other areas.

AFRY Minor model adjustments

We have updated our estimates, owing primarily to the new divisional structure, with the exclusion of the AFRY X division. We do not consider these changes to be material, and we have not changed our SELL recommendation. We reiterate our SEK110 target price.

AFRY (Sell, TP: SEK110.00) - Choppy waters ahead

We expect Q4 sales to be up 4% YOY on solid demand for some segments in Process Industries, Energy, Management Consulting, and general industry, partly offset by a continued slowdown in growth from end-market weakness in real estate, capex-related pulp and paper projects, and some industrial segments. We forecast an adj. EBITA margin of 6.8%, down 170bp YOY, on pressure from weak end-market demand and lower capacity utilisation. We reiterate our SELL but have raised our target price to SEK110 (1...

AFRY (Sell, TP: SEK105.00) - Under pressure

We have downgraded AFRY to SELL (HOLD) and cut our target price to SEK105 (133) following the Q3 results and our more pessimistic view on the company’s performance near-term, where we believe it will face a more challenging situation for longer, given increased end-market weakness across business areas and more evidence that it is struggling to keep utilisation rates up.

AFRY (Hold, TP: SEK133.00) - Expecting sales to grow, but margins to c...

Although we forecast 10.5% sales growth YOY in Q3, we expect the adj. EBITA margin to slip from 7.1% in Q3 2022 to 6.1% as a result of weak end-market demand and intensified competition for AFRY X and some parts of the Infrastructure division. We are 1% below consensus on Q3e sales and 2% below on adj. EBITA. We reiterate our HOLD but have cut our target price to SEK133 (150) after reducing our 2023–2025e EPS by 4–12%.

AFRY - Initiation of coverage - Caught in the middle

We estimate that 40%+ of AFRY’s business should benefit from the green transition and higher demand for consulting services relating to digitalisation, urbanisation, and European energy security. However, weakness in some of its end-markets (mainly real estate) is intensifying competition and putting pressure on margins, and looks set to hamper its performance short-term. We initiate coverage with a HOLD and SEK150 target price. Europe’s third-largest consulting company with a strong Nordic focu...