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Bonava (Buy, TP: SEK55.00) - Recalibrating for new reality

Due to flagged delays in Germany (related to Covid-19) and a weak Nordics margin (unrelated to Covid-19), Q1 profits missed our estimate and consensus significantly. The company improved transparency, providing longer-term project completion guidance and more detailed P&L statements; as a result, we have recalibrated our forecasts. In turn, we have cut our target price to SEK55 (70); however, we like the risk/reward on our view of an attractive relative valuation and cycle-low forecasts, and rei...

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Bonava (Buy, TP: SEK70.00) - Long-term Covid-19 effects

The near-term impact from Covid-19 across Bonava’s markets varies but has so far been limited. However, in all markets unemployment is rising and we are concerned consumers will be reluctant to buy homes not yet started or not scheduled for completion for another year or two. Thus, we expect Covid-19 uncertainty and rising unemployment to hit Bonava’s housing starts, and have cut our EPS forecasts. Given the recent market sell-off, we reiterate our BUY but have lowered our target price to SE...

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Bonava (Buy, TP: SEK108.00) - DPS and Nordic EBIT miss

The text and CEO commentary in the Q4 report were positive, implying future improving markets, recovering sales, and profitability. However, the Q4 results missed our forecasts and consensus on weaker results in Bonava Nordic, which missed due to a project delay, a rise in unsold units, and low margins. We note that the other divisions beat our forecasts. Nonetheless, the reduction in the proposed DPS was a disappointment to us. We have trimmed our forecasts and have cut our target price to SEK1...

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Bonava (Buy, TP: SEK115.00) - EBIT margins set to rise long-term

Bonava announced on 8 January that it will book a EUR15m non-recurring cost in Q4 relating to the closure of its Northern Finland (Oulu) operations, and impairment losses from sunk costs for two plots of land elsewhere in Finland. We view these as clean-up costs for exiting some of the weakest-performing markets in the Nordics, and expect margins in Bonava Nordic to improve once the loss-making divisions are closed. We reiterate our BUY, and have raised our target price to SEK115 (110) on our up...

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Bonava (Buy, TP: SEK110.00) - Underperformance = opportunity

Bonava’s housing sales in Sweden have recovered in 2019, in line with peers. However, unlike peers the share price has not recovered. We believe this is partially due to its accounting (IFRS-IFRIC15), which means it must much more strictly show the effects of 2017–2018 price cuts on apartments, unlike peers whose accounting smooths profits. We expect a solid Q4 result, due on 23 January (07:30 CET), on high unit deliveries in Germany, Nordics and the Baltics. We have upgraded to BUY (HOLD), ...

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Bonava (Hold, TP: SEK110.00) - Nordic weakness hit Q3

The Swedish and Nordic divisions reported Q3 EBIT margins below our forecasts. The underlying EBIT margin in Germany was broadly in line, but weak figures in the Nordics and Sweden and a pre-warned 12-year old SEK100m legal settlement resulted all in a miss on group EPS and adj. EPS. We expect 2021 to mark a company low-cycle earnings year; we reiterate our HOLD, but have cut our target price to SEK110 (115).

Reduced growth, high valuations

Growth in Nordic construction volumes is declining on lower residential volumes, but high commercial property prices should boost private building volumes (although worsening macro indicators pose a risk). Public building and civil engineering volumes are continuing to grow, but not enough to offset the lower residential volumes. Valuations have spiked and seem rich for a number of the names we cover. We keep our neutral sector view, and our top sector picks are NRC, YIT, and Veidekke.

Bonava (Hold, TP: SEK115.00) - Foundations softening

According to data from Booli Pro, Bonava’s casking prices in Sweden are down 17.6% from their 2017 peak and by 14.1% per sqm; also, Germany’s macro outlook is deteriorating, together prompting us to cut our 2019–2021e group earnings. Shorter-term, we are above consensus on Q3e revenues, but below on EPS (results due on 23 October). We reiterate our HOLD but have cut our target price to SEK115 (121).

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Bonava (Hold, TP: SEK121.00) - Set for lower margins, despite improvin...

Bonava reported Q2 EBIT in line with our forecast; however, this was inflated by plot sales, indicating an underlying miss. Consumer sales were broadly in line, but the volatile investment sales were below our forecast. On the Q2 earnings call, management highlighted that margins in Sweden have not yet been hit by the 2018–2019 price cuts due to lagging accounting principles. We reiterate our HOLD, but have raised our target price to SEK121 (115).

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Bonava (Hold, TP: SEK115.00) - Weakening fundamentals; HOLD

We have cut our estimates of residential units delivered in 2020–2021 given Sweden’s slowing housing market, and in turn cut our revenue and margin forecasts. We have also lowered our long-term forecasts for Germany. We are now below consensus for Q2e (results due on 16 July; estimated at 08:00 CET). Given the downside risk to Q2e consensus and our lower forecasts, we have downgraded Bonava to HOLD (BUY) and cut our target price to SEK115 (133).

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