The company's backlog in Q1'24 was rebuilt with the final acquisition of the Bug perimeter contract and several smaller contracts.
This should allow it to wait out the current period of lower contract supply. In the medium term, the company should benefit from the unlocking of EU funds (including exposure to infrastructure for the energy transition) and increased defence spending. Indicatively, the company is no longer as ‘cheap’ as it was a year ago. The EV/Sales ratio is clearly above the median for recent years, but still below the previous record highs of 2015-16.
At the same time, the changes that have taken place in recent years, including getting rid of the ballast of subsidiaries or building a reference on unitary larger-scale contracts, may allow for a long-term re-rating. At the current market price div yield is close to 9%, the P/E for the coming years at our forecasts is 8-9x. We are reiterating an accumulate rating and a current target price of PLN 31.0.
Recent results
In 2023, the company generated revenue of PLN 547m (+8% y/y) and net profit of PLN 22.4m (comparable y/y). The 2023 results were burdened by i) maintaining the consolidation of bankrupt Zues (the company was sold in 2024, in 2023 it had a PLN -23.5m book net loss and charged a similar amount to consolidated results), ii) the one-off recognition of PLN 9.5m of warranty provisions on a perimetry contract that was executed from 2022 (from 2024 onwards, the company will recognise provisions over the life of the contracts). In Q4'23 alone, the company generated PLN 138m in revenue (-41% y/y, a year ago the peak of the engagement on the Belarusian border contract) and a net loss of PLN -4.3m (the result was burdened by a large portion of Zeus' annual result and the aforementioned guarantee provision). At the end of Q4'23, the company had net cash of PLN 27m (receivables from traction contracts were still to be received in Q1'24).
