This report was prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 3.0.
Key facts from published results:
â–ª In Q3 22, Unibep recorded a higher than we expected increase in sales revenue, which amounted to PLN 576 million, an increase of 63% y/y, a decrease of 4.1% q/q.
â–ª At the key level of the gross margin, there was a decrease compared to previous quarters (6.3% vs. 9.2% in Q2 22 and 8.2% in Q1 22.
â–ª The Group generated an operating profit of PLN 17 million compared to PLN 11.1 million a year ago (increase by 52.6% y/y), and almost half as compared to Q2 22 (decrease by 47.5% q/q).
â–ª On the net profit level, the result of PLN 11.2 million should be considered weak at this level of revenue (decrease by 7.1% y/y, decrease by 52.2% q/q).
We consider the results for Q3 22 to be a bit disappointing. In our opinion, the rich portfolio of contracts (PLN 3.4 billion) does not pose a risk to the achievement of forecasts in terms of revenue, but the threats to maintaining profitability (including inflation, prices and availability of materials), which we pointed out, have started to materialize. We hope that the recently concluded contracts (including in the infrastructure and energy and industrial construction segments) will contribute to rebuilding margins in the coming quarters, so we leave the valuation unchanged at PLN 10.
Expected impact: We consider the results for Q3 22 to be a bit disappointing, although looking at the three quarters of 2022 in total, they should still be considered good compared to other companies from the construction sector and taking into account a number of problems faced by the industry this year - significant higher costs of materials, energy, transport, pressure to increase wages and lower availability of employees. In our opinion, the segments of cubature construction and infrastructure, which implement large and most extended contracts, are under the greatest pressure of these factors. In Q3 22, the profitability of the building construction sector dropped the most (to 2.3% from 4.2% in Q2 22), which accounted for more than half of the Group's revenues. In second place in Q3 22 in the structure of revenues was the infrastructure segment (share of 21.1%), which in turn recorded an increase in profitability from 1.9% to 5.6%. The good result of the segment was influenced by the completion of the construction of the third and fourth sections of the dam on the border with Belarus and the completion of the construction of the S61 road on the section between Szczuczyn and EÅ‚k. In the modular construction segment, persistent difficulties in the form of high prices of raw materials and materials as well as transport costs, including freight, negatively affecting the profitability of contracts on the Norwegian market, resulted in another quarter of loss (PLN 6.2 million in Q3 22 against PLN 77 PLN 6 million of revenue). We see an opportunity for this area in extending the offer to the hotel and development industries, as well as expansion to the German market. The biggest positive surprise for us in Q3 is the result of the energy and industrial construction segment, which achieved PLN 8.9 million in profit with PLN 75 million in revenue. We forecasted that only the disbursement of funds from the National Reconstruction Plan (KPO) would contribute to the dynamic development of this area. Although the prospect of obtaining EU funds from the reconstruction fund has recently receded, Unibep has acquired contracts with a total net value of approx. PLN 710 million in this area, which allows us to look with optimism at the development of this segment and expect further positive contribution to the Group's result in subsequent quarters. As in previous quarters, despite a small share in the Group's revenue, the development segment had the greatest impact on the result, which generated PLN 22.8 million of profit with PLN 68.8 million of revenue. In Q3 22, Unidevelopment handed over 116 premises, of which 107 as part of joint development projects with external entities. By the end of the year, the Company plans to hand over approx. 160 premises, e.g. in the investments Latte Residential in Warsaw and Idea Leo in Radom, which may have a significant positive impact on the result of the fourth quarter. Sales in Q3 22 amounted to 110 units, of which 78 as part of joint development projects. This gives a total of 318 units sold in 2022 (a decrease of 59.6% y/y) and raises concerns about the decrease in the segment's positive contribution to the Group's results in the coming years. In our opinion, the situation on the development market will have a significant impact on the Unibep stock performance.
Analysts: Artur Wizner
GPW’s Analytical Coverage Support Programme 3.0
