Mostostal Zabrze operates in specialist construction, assembly and industrial production, and in all these areas, despite concerns about the economic situation, it still generates good results. Quarterly results Once again, Mostostal Zabrze recorded very good results. Revenues in 1Q23 increased by 51% y/y, EBITDA by 47%, and net profit by 94%.
In terms of revenue, all three basic operating segments recorded high growth, while at the level of operating profit, the Industrial Implementation and Design segment and the Machine Construction segment recorded high y/y dynamics, while the result of the General and Engineering segment, the construction segment, was lower than in the previous four quarters.
In the latter case, the company cited a large part of the contract for POSCO as the reason, in which there were minor delays, which translated into a decision to take a more cautious approach in showing the current profitability of the contract. Lower backlog, as forecast At the end of April, the Group's order backlog amounted to PLN 841.9 million, which means a decrease by 29.1% y/y and at the same time is responsible for 72% of revenues from 2022.
This situation is in line with the announcements for 2021 and included in our forecasts from previous reports. Since the restructuring that took place a few years ago, the company has declared to avoid very high value individual contracts, which expose it to greater risk. Despite this, she undertook two large orders, which we wrote about earlier. One of these contracts is nearing completion and the other is half way through. After their completion, the company will continue to focus on smaller, but more profitable contracts.
New perspectives The cooperation between Mostostal Zabrze and ArcelorMittal Poland looks very prospective. Mostostal has been its partner in repair works for years, an example of which is the currently conducted general overhaul of the Blast Furnace, where it performs the largest scope of works. A company from the Mostostal Zabrze group also carries out conceptual and design work in the process of decarbonisation of steel production. Implementation of such projects is rather a question of "when, not if", and their value will be counted in billions of PLN.
The presence of the company in these projects from the very beginning, with its experience working for ArcelorMittal, gives a good chance to participate in these large contracts also in the future. Valuation and recommendation The favorable judgment in the Wood case and the increase in market valuations translated into an increase in the value of the company calculated by us.
The value of shares in the DCF model with the payment for the Śląski Stadium is PLN 3.80, without the payment PLN 5.60, while the valuation based on a comparison with other companies is PLN 5.80. This gives an average of PLN 5.30, which means that the buy recommendation for Mostostal Zabrze shares is upheld.
