The company has had a revenue strong Q1-Q3'23 (we also expect high throughput in Q4'23). At the same time, margins are still not helped by the "difficult" contracts of 2017 (heading to completion at different rates) or the tram contracts won before the outbreak of war in Ukraine. In recent months, the company's backlog was strengthened by a large contract for PKP PLK (Katowice-Będzin). It should be taken into account, however, that after the company's record-breaking throughput in 2023 (higher than our earlier expectations), the next year in this field may be weaker. On the other hand, we see opportunities for improvement on the profitability side, due to the reduced importance of problematic contracts or potential valorisation and surcharges.
In the medium term, ZUE is well positioned for an influx of EU funds (both rail and tram infrastructure). In the last two years, the company has also entered foreign markets more extensively, which should build competence to become independent from the domestic market. We currently set the fair value (target price) of ZUE shares at PLN 8.43, implying an accumulate rating (previously: buy, PLN 7.76). The valuation does not take into account possible claims and valorisation from PKP PLK (lawsuits filed for PLN 93m, ca. PLN 4.0/share).
