Warsaw Stock Exchange: Mirbud - Economic slowdown means stabilizing costs
Aa
Share
Mirbud reported a strong cash position in 4Q22 which raise hopes for a higher-than-expected dividend payout in months ahead. As we consider the company’s business model to stay intact in ensuing years (Mirbud is unlikely to divest investment properties), we believe the company’s current activities should bring further improvements in results on a y/y basis in 2023. This predominantly stems from our forecast of 1% better gross margin on a y/y basis in 2023 on the back of a slightly lower cost base. We believe that costs may pick up again in 2024 on the back of reviving economic growth. On top of that, Mirbud recently filed the best bid for the S19 expressway with a planned budget of PLN 1.3bn, which does not yet appear in the company’s backlog, but in case the deal is signed it will provide revenue generation beyond 2024 and substantiates our thesis that Mirbud is likely to grow its revenues above PLN 3.5bn in 2025E. All in all, we increase the EBITDA forecast by 40.6% for 2023E, by 8.0% for 2024E and by 11.4% for the 2025E period to PLN 259.9m (up 33.7% y/y) in 2023E, PLN 200.9m (down 22.7% y/y) in 2024E and PLN 208.6m (up 3.9% y/y) in 2025E. We increase our Fair Value by 96.4% to PLN 9.93, which provides 21.3% upside, and we reiterate our BUY recommendation.
Share data
Number of shares (m) 91.7
Market cap (EUR m) 155.8
12M avg daily volume (k) 160.0
12M avg daily turnover (EUR m) 0.2
12M high/low (PLN) 8.12/2.90
WIG weight (%) 0.12
Reuters MRB.WA
Bloomberg MRB PW
Total performance
1M +21.15%
3M +39.76%
12M +161.39%
Shareholders
Jerzy Mirgos 45.34%
NN OFE 10.05%
2023E and 1Q23 results preview
According to Polskie Sklady Budowlane (PSB), a Polish branch organization monitoring the prices of materials in Poland, in March, construction material prices grew by 11% y/y, which is half of the growth recorded in April 2022. We expect the growth of costs to further decelerate in coming months and fall to single-digit values, underpinning our 2023E EBITDA growth projections for Mirbud. Due to less favourable weather, we expect the revenue level to arrive at PLN 451.8m, -10.0% y/y. As a result, we forecast EBITDA in 1Q23E at PLN 26.8m, -6.4% y/y. The gross profit line is expected to come in at PLN 38.4m, -7.7% y/y, which indicates an 8.5% margin, better than the 8.3% recorded a year ago.
Backlog still strong
Mirbud is systematically building a portfolio of orders. At the end of 4Q22, Mirbud had orders worth PLN 5.56bn. For the company it is crucial that the value of the portfolio should stay over PLN 5bn in each period. The great majority of orders (75%) for now comprise road investments, and the remaining 14% are public buildings, 9% production and warehouse construction and approximately 2% residential buildings.
Higher multiple warranted
Mirbud trades at a 2023E EV/EBITDA of 2.5x, which constitutes a 55.7% discount to international peers and a 69.9% discount to Budimex. Budimex is recognized due to its high dividend payout track record; however, we still feel the premium to Mirbud should be smaller due to Mirbud’s continued inking of new contracts which we believe will allow the company to increase margins going forward.
4Q22 results overview/1Q23 results preview
Our main take away after the 4Q22 call with the management was that the profitability is likely to be at least maintained in 2023 vs 2022. We believe that this is an overly conservative guidance. We forecast EBITDA in 1Q23E at PLN 26.8m, -6.4% y/y. The gross profit line is expected to come in at PLN 38.4m, -7.7% y/y, which indicates an 8.5% margin, better than the 8.3% recorded a year ago.
Figure 2. Mirbud: 1Q23 results preview
Changes in forecast
Figure 3. Changes in forecasts
Ipopema vs. Consensus
Figure 4. Ipopema vs. Consensus
Analyst
Robert Maj
+ 48 22 236 92 90
