New financial targets signal increased profitability

Estimates down to reflect lower employee base

DCF valuation range SEK 20-39 (21-41)

Q2: Sales -13% y-o-y, EBITA margin of 8.5% (9.7%)
Projektengagemang (PE) reported Q2 net sales of SEK 278m (320m), 7% behind ABGSCe. The main deviation from our estimates was a lower number of employees – 845 in Q2, on average, and down from 891 in Q1 and below our forecast of 922. During the conference call, management said that the firm had employed ~100 employees since the start of the year and that roughly half of them had started their tenure at PE. Since the average number of employees is down by ~100 employees in H1, it seems as though staff turnover has been higher than normal at the beginning of the year. We see two possible reasons for this: 1) turnover was exceptionally low last year, according to the industry survey Investeringssignalen, due to uncertainty regarding COVID-19 and 2) the new CEO’s initial measures to create a more agile and entrepreneurial PE may have led to some employees to reconsider their future within the company. Despite the lower headcount and thus sales, the EBITA margin held up well in Q2 at 8.5% (9.7%) vs. our forecast of 8.9%.

Sales estimates down ~6%, LT EBITA margin almost intact
We lower our forecast following the Q2 report to reflect the lower employee base. However, we believe that a recovery is on the cards once employee turnover stabilises. One indication of this is that PE ended Q2 with 880 employees, vs. its Q2 average of 845. Sales revisions is ~6% down for ’21e-‘23e. The EBITA margin revisions are 0.3-0.1pp for ‘21e-‘23e, as we saw an uptick in hourly rates in Q2 in conjunction with new financial targets for 2025e (i.e. a shift in the EBITA margin from 8% to 10%) We forecast an EBITA margin of 8.1% for ‘23e.

Share trades at P/E 11.5x on revised ‘22e
In accordance with the estimate changes, our DCF valuation range is adjusted to SEK 20-39 (21-41). The share is trading at a P/E of 11.5x on our
...

research@abgsc.com (Introduce.se)

ABG Sundal Collier - Introduce.se