Last Update 16 Dec 25

AFRY: Backlog And Restructuring Will Drive Future Earnings Visibility And Upside

Analysts have modestly reduced their Afry price target to SEK 210 from SEK 240, citing a slower recovery and more gradual margin improvement. They emphasize that a solid backlog, ongoing restructuring, and strategic project wins support the longer term earnings outlook.

Analyst Commentary

Bullish analysts highlight that the reduced price target still implies meaningful upside, arguing that current valuation does not fully reflect the quality of Afry's backlog or its potential for margin expansion as restructuring measures take hold.

Bullish Takeaways

Bullish analysts view the target cut as a timing adjustment, noting that the core investment thesis around improving earnings quality and structural demand for Afry's services remains intact.
The growing and diversified backlog is seen as providing strong revenue visibility, supporting confidence in medium term growth and cash flow generation.
Ongoing restructuring initiatives are expected to drive gradual margin uplift, which bullish analysts believe is not fully priced into current valuation multiples.
Strategic project wins in higher value segments are interpreted as evidence of strong execution, underpinning expectations for a re rating as profitability improves.

Bearish Takeaways

Bearish analysts worry that the slower than anticipated recovery increases execution risk, potentially delaying the inflection point for earnings and margin expansion.
There is concern that the more gradual margin improvement could limit near term operating leverage, justifying a more cautious stance on valuation.
Some analysts flag the risk that prolonged restructuring may weigh on costs and implementation complexity, which could pressure short term profitability.
The revised target reflects caution that macro uncertainty and project timing could create volatility in quarterly results, tempering enthusiasm for aggressive multiple expansion.

What's in the News

Afry issued new long term guidance, targeting net sales of 35 billion SEK for full year 2028, signaling confidence in sustained growth despite a slower near term recovery (Corporate Guidance)
At its Capital Markets Day 2025, Afry reiterated that selective, strategic bolt on M&A in high performing and high growth segments will remain a key lever to support the group strategy (Capital Markets Day 2025)
Management emphasized a disciplined, fully integrated M&A approach, focusing on non Nordic expansion across the Americas, the rest of Europe, and Asia Pacific to strengthen Afry's global footprint (Capital Markets Day 2025)

Valuation Changes

Fair Value Estimate remains unchanged at approximately SEK 204 per share, indicating no revision to the intrinsic value assessment.
Discount Rate has risen slightly to about 5.95 percent from 5.93 percent, reflecting a marginally higher required return.
Revenue Growth Assumption is essentially unchanged at around 3.23 percent, signaling a stable outlook for top line expansion.
Net Profit Margin Assumption is stable at roughly 6.99 percent, with only an immaterial numerical adjustment.
Future P/E Multiple has risen slightly to about 13.60x from 13.59x, indicating a modestly higher implied valuation multiple on forward earnings.

Rising global decarbonization and infrastructure trends, plus expansion in growth markets, are driving robust demand and revenue diversification for AFRY across energy and industrial sectors.
Restructuring, portfolio optimization, and a focus on high-value consulting are expected to strengthen efficiency, margin quality, and recurring revenue streams.
Ongoing restructuring, underutilization, market uncertainty, currency risks, and integration challenges threaten revenue growth, margins, and operational efficiency if not addressed effectively.

Catalysts

About Afry

Provides engineering, design, and advisory services for the infrastructure, industry, and energy sectors in the Nordics, North America, South America, Asia, rest of Europe, and internationally.What are the underlying business or industry changes driving this perspective?

The accelerating global push for clean energy and decarbonization is sustaining strong demand within AFRY's Energy division (e.g., high interest in nuclear, robust activity in Asia for renewables), positioning the company to benefit from a rising order backlog and top-line growth as clients continue investing despite current economic caution.
Ongoing urbanization and infrastructure modernization in key markets are leading to steady transport infrastructure demand and a healthy mix of multiyear and smaller orders, providing visibility and resilience for future revenue streams.
The company has undertaken large-scale restructuring and portfolio optimization, including a new group structure and significant cost reduction initiatives, which are expected to improve operational efficiency, utilization rates, and net margins over the medium term.
Geographic expansion through strategic acquisitions in emerging markets, as seen with the purchase of Reta Engenharia in Brazil, is diversifying revenue away from cyclical Europe and opening new growth opportunities in critical high-demand sectors (e.g., mining/metals), supporting sustainable earnings growth.
The shift towards high-value advisory and sustainability consulting, together with initiatives to improve pricing quality of the backlog, is expected to lift recurring revenue and net margins as demand for ESG and strategic consulting services increases.

Afry Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Afry's revenue will grow by 3.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.6% today to 6.8% in 3 years time.
Analysts expect earnings to reach SEK 2.0 billion (and earnings per share of SEK 14.84) by about September 2028, up from SEK 941.0 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 14.3x on those 2028 earnings, down from 17.6x today. This future PE is lower than the current PE for the GB Professional Services industry at 18.8x.
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 5.83%, as per the Simply Wall St company report.

Afry Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent declines in utilization rates year-over-year across all divisions, coupled with ongoing restructuring and headcount reductions, may indicate excess capacity, reduced project volumes, or inefficiency-potentially putting continued downward pressure on revenues and net margins if the trend is not reversed swiftly.
Ongoing restructuring initiatives (SEK 200–300 million in additional costs over the next 12 months), primarily personnel-related, highlight the risk of underutilization or market demand not matching cost structure, which could lead to elevated costs and margin compression if the anticipated payback or improved utilization does not materialize as expected.
Market uncertainty and cautious client investment decisions, especially in certain industrial segments like automotive, pulp & paper, and real estate, expose AFRY to demand volatility; delayed client decisions and prolonged downturns may limit order intake growth, affecting top-line revenue and long-term earnings potential.
Exposure to negative currency effects, as shown by the significant FX-related impact on net sales and EBITA this quarter, introduces ongoing financial risk, particularly given AFRY's international expansion strategy, which could further distort revenue and profit growth if unfavorable forex trends persist.
Reliance on successful integration of acquisitions (e.g., Reta Engenharia) and strategic restructuring to drive growth and margins carries operational risk; missteps or delays in integrating new entities or realizing expected synergies may lead to higher costs, operational complexity, and underperformance against growth and net margin targets.

Valuation

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

The analysts have a consensus price target of SEK213.75 for Afry based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK240.0, and the most bearish reporting a price target of just SEK165.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK29.5 billion, earnings will come to SEK2.0 billion, and it would be trading on a PE ratio of 14.3x, assuming you use a discount rate of 5.8%.
Given the current share price of SEK146.4, the analyst price target of SEK213.75 is 31.5% 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

AFRY: Strengthening Backlog And Restructuring Will Drive Recovery Momentum