Projektengagemang - Still waiting for sales initiatives to bite
Solid profitability in Q1 Recovery will take longer than previously expected DCF valuation range SEK 21-41 (22-42) Q1: Sales behind ABGSCe, but profitability held up well Projektengagemang (PE) reported Q1 sales of SEK 282m (-17% y-o-y), which was 9% below our forecast; the y-o-y decline was on the same level as Q4’20 despite facing easier comps. The deviation towards our estimates was mainly because PE had 47 less employees in Q1 than in Q4, where we had forecasted q-o-q growth in employees. From the conference call with management, we understood the development was driven by two factors: 1) a slight overhang from the restructuring in Q4, where some of the employees that were made redundant left in Q1 instead of Q4, and 2) temporarily higher employee turnover in Q1. Despite sales coming in lower than expected, EBITA was SEK 18.
2m (28. 9m) for a margin of 6. 5% (8.
5%). We forecasted an EBITA margin of 8%; the deviation was caused by a lower utilisation rate and admin cost headwinds following the sales shortfall. A 6.
5% EBITA margin is a positive sign, as PE should be able to increase it further if sales and the utilisation rate improve. Slower recovery, sales est. down ~4%, margins almost intact The q-o-q drop in employees was unexpected, in our view, but we think management communicated a reassuring message on the conference call, explaining that market conditions have improved during the quarter and that the order backlog is improving.
One example of this is the framework agreement with Stockholm Stad communicated on 22 April. The probable cause of the higher employee turnover in Q1 is that the restructuring in Q4 had some negative short-term effects. We decrease our sales estimates by ~4% on the back of the report, as we move the sales recovery a bit further forward.
However, we only make minor adjustments to our assumed EBITA margins, which results in negative EPS revisions of 7-6% for ‘22e-‘23e. Share trades at P/E 10. 5x on revised ‘22e We lower our D.
