Projektengagemang: Tougher market ahead - ABG

Internal improvements offset by cautious customers

Recession risk reflected in update, ‘23e EBIT down ~20%

Makes a smaller acquisition within Environment

Q3e: Net sales of SEK 186m (194m) and EBITA of 0.1m (0.9m)
Projektengagemang (PE) continued to make internal improvements in H1’22, resulting in increased profitability, and in Q2 it also reported positive net recruitment for the first time in two years. However, since our last update we have seen a drop in leading macro indicators, such as PMIs, and a recession in Sweden in 2023 is looking increasingly likely. We think the situation in the real estate sector is especially challenging, with rising input costs making customers more cautious in their investment decisions. Our thinking is that this macro headwind will temporarily make it hard for PE to continue its recovery. For Q3, we expect net sales to be down 4% y-o-y and EBITA to be SEK 0.1m (0.9m) for an EBITA margin of 0.0% (0.5%).

Leading indicators have weakened sharply in last 3 months
The Swedish PMI for the service sector dropped to 55 in September, down from 63.3 a number of months ago, and in Innovationsföretagen’s latest survey, Investeringssignalen, which was published this month, we saw a decline in expectations among architects in terms of hiring needs, price developments and order intake. We make rather large estimate revisions following these weaker market conditions, as our earlier thesis of an improving adj. EBITA margin next year is hard to justify. Our ‘23e EBITA and EBIT estimates are down 19% and 21%, respectively. Our sales estimate for ‘23e is only down 3% and that is mainly due to PE making a smaller acquisition within its Environment business area, where the acquired Gärdhagen Akustik AB will add 5 FTEs and SEK 6m in yearly sales. The acquisition was closed on 10 October.

New fair value range of SEK 15-25 (17-29)
We lower our fair-value range in order to reflect our estimate revisions over our forecast period but forecast that PE will ...
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/projektengagemang/Equity-research/2022/10/projektengagemang---tougher-market-ahead/