Projektengagemang: Clear profitability improvement in Q1 - ABG

- Excellent cost control behind beat
- Market conditions still challenging
- Positive update on cost savings for office space

Q1: Sales -11% y-o-y, adj. EBITA margin of 8.3% (7.3%)
The Q1 report was a trend shift for Projektengagemang (PE) – not from a sales perspective but from a profitability one. Net sales of SEK 218m (246m) was down 11% y-o-y, but adj. EBITA was SEK 18.2m (17.9m). It was 2% lower than ABGSCe on sales but clearly ahead on EBITA, where we expected 7.9m. What is even more impressive with this result is that there were significantly negative calendar effects that theoretically should have affected the EBITA margin by close to 200 bps. The deviation mainly stems from lower-than-expected personnel costs, suggesting the lay-offs done in Q4 had a larger impact than we anticipated. The company still struggles with tough market conditions for housing and commercial buildings, but we believe that this was clearly a step in the right direction.

We lower sales by 3% and EBITA by 10% for '24e
PE had a lower recruitment pace than we assumed, which is why we lower our sales estimates by 3% for '24e. Given the strong results in Q1 and what should be long-term sustainable cost reductions, we are more optimistic regarding our profitability assumptions and raise '24e EBITA by 10%. For '26e we are now expecting an EBITA margin of 7.1%, which is still clearly below PE's target of 10%.

Fair value range adjusted to SEK 12-23 (10-18)
We raise our fair value range to SEK 12-23 (10-18) to reflect our positive earnings revisions. The real estate market is still challenging – the company indicate a more positive market after the summer or 2025 at latest – so we will probably have a few quarters left of declining sales. Profitability-wise, it is clear after Q1 that the company is trending in the right direction again, which we think will continue for some time given the low starting point.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/projektengagemang/Equity-research/2024/4/projektengagemang---clear-profitability-improvement-in-q1/