High-End Funen And Eco-Friendly Morrow Concepts Will Attract More Customers

Key Takeaways

• Stabilization in the Danish housing market and positive macro trends are expected to boost consumer interest and drive revenue growth.
  
• New product offerings and strengthened sales efforts aim to increase market share and enhance net margins.
  
• Declining customer confidence and revenue, alongside financial strains and delays, threaten HusCompagniet's earnings stability and future growth in the housebuilding market.

Catalysts

Develops single-family detached houses in Denmark.

• The stabilization in the Danish housebuilding market, driven by stable core inflation and slightly declining interest rates, is expected to stimulate future consumer interest in housebuilding, potentially boosting revenues.
  
• Positive macro trends, such as a high employment rate and improving consumer sentiment, are projected to support increased sales in both B2C and B2B segments, which should aid in driving revenue growth.
  
• The introduction of new product offerings like the high-end Funen concept and the environmentally friendly Morrow concept is anticipated to attract more customers and increase market share, potentially enhancing revenues and net margins.
  
• The company's strengthened sales efforts and increasing order backlog, along with the newly secured building permits for large B2B projects, suggest a potential future increase in revenues and a boost to earnings as these projects commence.
  
• With ongoing efficiency improvements and cost containment, the company expects to maintain or improve EBITDA and EBIT margins, which could lead to better net earnings in the future.

HusCompagniet Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming HusCompagniet's revenue will grow by 22.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.3% today to 5.0% in 3 years time.
• Analysts expect earnings to reach DKK 198.1 million (and earnings per share of DKK 7.02) by about January 2028, up from DKK 6.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, down from 201.8x today. This future PE is greater than the current PE for the DK Consumer Durables industry at 11.1x.
• Analysts expect the number of shares outstanding to grow by 9.55% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.66%, as per the Simply Wall St company report.

HusCompagniet Future Earnings Per Share Growth

Risks

• Customer confidence has declined recently, which could impact future sales and revenues due to reduced demand in the housebuilding market.
  
• A lower average sales price in the B2B segment in Denmark indicates potential pressure on margins and earnings if this trend continues.
  
• A decline of 11% in revenue over the first 9 months of the year compared to the previous period shows that the company is still recovering from past low sales, which might affect earnings stability.
  
• The company reported a free cash outflow in Q3, which signals potential financial strain or inefficiencies that could impact net margins and future earnings.
  
• Delays in receiving building permits and project timelines can affect revenue recognition and cash flow, posing a risk to maintaining financial performance and growth projections.

Valuation

• The analysts have a consensus price target of DKK75.0 for HusCompagniet based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK4.0 billion, earnings will come to DKK198.1 million, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of DKK56.2, the analyst's price target of DKK75.0 is 25.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.