Expanding Acquisitions And Focus On EU Green Transition Will Strengthen Market Position By 2030

Key Takeaways

• Inwido's strategic acquisitions and e-commerce focus are expected to bolster growth and market position by leveraging financial headroom and profitability improvements.
  
• New product innovations and the EU's green transition present opportunities for revenue growth, enhanced margins, and increased market share.
  
• Challenging Eastern European markets and reliance on M&A for growth pose risks to Inwido's revenue and earnings stability.

Catalysts

Through its subsidiaries, engages in development, manufacture, and sale of windows and doors.

• Inwido is focusing on synergistic acquisitions and has financial headroom for further growth, which could significantly increase revenues and improve market positioning by 2030.
  
• The company is poised to benefit from the EU's green transition, particularly regarding energy-efficient window and door replacements, which could drive future revenue growth starting 2026.
  
• Inwido's strategic focus on e-commerce and online sales is showing profitability and growth, potentially increasing net margins and boosting their bottom line.
  
• They are pursuing new product innovations, like the low CO2 window launched by Pihla Group, which can improve revenue and margins by meeting regulatory demands and capturing market share.
  
• Restructuring measures, such as closing less profitable business units, are expected to improve consolidated profit margins in the longer term, aiding earnings growth.

Inwido Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Inwido's revenue will grow by 5.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.1% today to 8.1% in 3 years time.
• Analysts expect earnings to reach SEK 846.0 million (and earnings per share of SEK 14.59) by about February 2028, up from SEK 538.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, down from 22.0x today. This future PE is lower than the current PE for the GB Building industry at 24.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.57%, as per the Simply Wall St company report.

Inwido Future Earnings Per Share Growth

Risks

• The company faces challenging market conditions in Eastern Europe, with reduced demand and increased competition leading to lower margins, impacting revenue and profitability.
  
• Inwido has experienced a significant decline in organic sales over the past two years, a trend that may continue to affect overall revenue and earnings growth.
  
• The closure of business units and restructuring costs in certain areas, such as the UK, underscore potential operational challenges and can hinder net margins and EPS in the short term.
  
• Although some geographical segments like Scandinavia are performing well, weaknesses in other areas, notably Norway and Eastern Europe, could create regional revenue disparities, impacting earnings stability.
  
• Future profitability and growth heavily depend on acquisitions and M&A activities, which introduce execution risks and uncertainties related to achieving the desired strategic scale and synergies.

Valuation

• The analysts have a consensus price target of SEK236.0 for Inwido 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 SEK10.4 billion, earnings will come to SEK846.0 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 6.6%.
  
• Given the current share price of SEK204.6, the analyst price target of SEK236.0 is 13.3% 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.