Construction Digitalization And AI Will Drive Long Term Earnings Power

Catalysts

About Admicom Oyj

Admicom Oyj provides cloud based, AI enabled ERP and financial software and services for construction and related industries in Finland and selected European markets.

What are the underlying business or industry changes driving this perspective?

• The gradual recovery in construction activity in Finland and the Baltics, combined with Admicom customers historically outgrowing the market, positions the company to convert even modest sector upturns into accelerating ARR growth and higher revenue.
• Deeper digitalization and productivity needs in construction, supported by Admicom’s unified platform, portfolio based pricing and single identity initiatives, should lift product adoption per customer and drive structurally higher net revenue retention and earnings.
• The new usage linked Ultima and accounting billing model, once the market returns to stronger nominal growth, is likely to create an automatic uplift in invoicing tied to customers’ top line, enhancing revenue scalability and supporting margin expansion.
• Expansion in Estonia and the wider Baltic region on top of the Bauhub base, and selective opportunity driven entries into other Nordic markets, can add a new leg of mostly recurring, higher margin revenue growth beyond the maturing Finnish core.
• Commercialization of AI driven features in site operations, accounting automation and software development productivity should deepen competitive differentiation, support premium pricing, and gradually improve net margins and free cash flow generation.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Admicom Oyj's revenue will grow by 9.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.0% today to 20.6% in 3 years time.
• Analysts expect earnings to reach €10.0 million (and earnings per share of €2.0) by about December 2028, up from €4.8 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 35.3x on those 2028 earnings, down from 46.3x today. This future PE is greater than the current PE for the FI Software industry at 25.7x.
• Analysts expect the number of shares outstanding to grow by 0.23% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.18%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The prolonged downturn in the Finnish and Baltic construction sectors, with economists now expecting only 3.5% total growth for construction in 2026, may mean a much slower cyclical recovery than investors anticipate. This could cap ARR expansion and keep revenue growth structurally below current expectations, ultimately weighing on earnings.
• Persistently elevated churn driven by customer insolvencies, bankruptcies and mergers, alongside unusually high company transaction related terminations, suggests Admicom’s SME heavy customer base is vulnerable to sector stress. This could erode the recurring revenue base, pressure net margins through higher customer acquisition costs and slow earnings growth.
• Execution risk from significant organizational and operating model changes, including the sales force reorganization and Finnish subsidiary mergers, has already led to weaker pipelines and underperformance in large customer new sales. Further integration or change fatigue could dampen sales productivity, limit cross sell momentum and delay scaling of EBITDA and net profit.
• Higher competitive intensity, with rivals using aggressive pricing to win new customers, may force Admicom to either concede deals or accept lower pricing power. This could constrain average deal sizes, limit the benefit from portfolio based pricing and price hikes, and compress net margins and long term earnings potential.
• The new revenue based Ultima and accounting billing model will only materially enhance invoicing once customers’ own revenues return to stronger growth. If the construction cycle remains weak or recovers more slowly than assumed, the expected automatic uplift in ARR and operating leverage may not materialize, leaving revenue growth and EBITDA margin expansion below current forecasts.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €56.75 for Admicom Oyj based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €48.5 million, earnings will come to €10.0 million, and it would be trading on a PE ratio of 35.3x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of €44.55, the analyst price target of €56.75 is 21.5% 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.