Partnership With Kingspan And Turnaround Plans Will Strengthen Future Market Position

Key Takeaways

• Partnership with Kingspan and selective acquisitions boost market presence, contributing to revenue growth and enhanced future earnings.
  
• Cost-control measures and positive developments in Norway and Denmark are expected to improve profitability and net margins amid market challenges.
  
• Declining sales and profitability amid weak market demand and challenges in core business areas threaten Nordic Waterproofing Holding's future revenue stability and earnings potential.

Catalysts

Develops, manufactures, and distributes waterproofing products and services for buildings and infrastructure in Sweden, Norway, Denmark, Finland, rest of Europe, and internationally.

• The partnership with Kingspan presents potential acquisition opportunities, which could lead to increased market presence and revenue growth.
  
• Turnaround plans implemented, particularly in the Norwegian prefab elements business, are beginning to show results and are expected to improve profitability in 2025.
  
• Efforts to control costs and slightly deflate cost/price developments in input materials can help improve net margins despite current market challenges.
  
• Improvements in the Danish market through Installation Services show strong results, which can positively impact earnings, especially with expectations of stable growth in Denmark.
  
• A solid balance sheet with a favorable debt-to-EBITDA ratio allows for selective acquisitions and expansion, which could enhance future revenue and earnings potential.

Nordic Waterproofing Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Nordic Waterproofing Holding's revenue will grow by 5.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.2% today to 8.7% in 3 years time.
• Analysts expect earnings to reach SEK 421.4 million (and earnings per share of SEK 17.48) by about March 2028, up from SEK 170.9 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 11.7x on those 2028 earnings, down from 25.6x today. This future PE is lower than the current PE for the GB Building industry at 22.1x.
• Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.72%, as per the Simply Wall St company report.

Nordic Waterproofing Holding Future Earnings Per Share Growth

Risks

• Decrease in net sales by 12% year-over-year indicates weak demand across markets, impacting revenue growth and future earnings potential.
  
• Profit erosion due to soft market conditions and decreased EBITDA, reducing net margins and overall profitability.
  
• Challenges in the prefabricated elements business with negative sales development and restructuring impacts, threatening future revenue stability.
  
• Weak order books and decreased sales in installation services, particularly in Finland, affecting revenue and profit margins in key geographic areas.
  
• The failure to see demand improvement in significant markets like Finland suggests continued pressures on revenue and earning prospects.

Valuation

• The analysts have a consensus price target of SEK169.0 for Nordic Waterproofing Holding 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 SEK4.9 billion, earnings will come to SEK421.4 million, and it would be trading on a PE ratio of 11.7x, assuming you use a discount rate of 6.7%.
• Given the current share price of SEK182.4, the analyst price target of SEK169.0 is 7.9% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.