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ZUE Company's Recent Results and Strategic Positioning: Strong Revenue Growth, Diverse Portfolio, and Expanding Presence in Foreign Markets

ZUE Company's Recent Results and Strategic Positioning: Strong Revenue Growth, Diverse Portfolio, and Expanding Presence in Foreign Markets
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Recent results

In Q1-Q3'23, the Company generated revenue of PLN 901m (+43% y/y) and net profit of PLN 10.1m. The Q3'23 results (PLN 359m revenue and PLN 5.9m net profit) were much higher than we had anticipated, due in part to higher y/y revenue growth and a one-time profit on the sale of fixed assets (nearly PLN 4m). The company's gross sales margin (3.2%) continued to suffer from the effect of a pool of low-margin contracts, among other factors. Contracts from the Romanian market were already contributing more significantly to revenues, which was associated with an increase in working capital commitment.

 

Portfolio

ZUE's backlog amounted to PLN 2.05bn after Q3'23. We estimate that railway contracts in Poland account for the largest share (about half) of the current backlog, followed by railway contracts on the Romanian market and municipal contracts (tramway). The remainder is made up of maintenance contracts and trading company orders. The portfolio still includes contracts for PKP PLK signed in 2017 (we estimate that the value of work on these contracts may still amount to a small amount).

 

Segmental positioning

The company has exposure primarily to the rail and tram markets (to a small extent also to local roads through its subsidiary Energopol). Both of these areas are largely financed by EU funds (rail - FEnIKS, KPO, CEF, tram lines - FEnIKS), their unblocking will have a positive impact on the supply of contracts. An entry into the PSE market was also planned in the past. On the other hand, entry into the Romanian market is not ZUE's only approach to foreign markets (a contract in Slovakia has already been executed). In 2023, the first Latvian contract was also secured, previously the company had also had a foothold in the German market or has been observing the Bulgarian direction for many years.


GPW’s Analytical Coverage Support Programme 3.0

GPW’s Analytical Coverage Support Programme 3.0

The Warsaw Stock Exchange's (GPW's) Analytical Coverage Support Programme 3.0 supports investment firms in drafting analytical reports which are financed by GPW. The objective of the Programme is to improve the availability of research covering less liquid companies, facilitating investors' informed investment decisions based on a reliable independent source of issuer information. Eligible to participate in the Programme are companies listed on the GPW Main Market (other than WIG20 participants) and on NewConnect. The Programme covers up to 50 issuers.

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