Inbox: RCB zu Strabag: Weiter "Buy", aber mit tieferem Kursziel

Akt. Indikation:  22.11 / 22.13
Uhrzeit:  21:25:19
Veränderung zu letztem SK:  0.50%
Letzter SK:  22.01 ( 0.00%)

Akt. Indikation:  41.50 / 41.85
Uhrzeit:  21:27:16
Veränderung zu letztem SK:  0.42%
Letzter SK:  41.50 ( -1.19%)

STRABAG confirmed at BUY, TP EUR 38 - Strong fundamentals prevail, TP cut on loss of DeTe contract

- We maintain the BUY rating but have lowered the target price to EUR 38 from EUR 41.5, reflecting the loss of the facility management contract with Deutsche Telekom as well as slightly CF projections
- 3Q results again provided evidence of the strong trading conditions in STRABAGs core markets, mirrored by a more upbeat FY 17 output target. The company reinstated the EBIT margin target of at least 3% (upon announcement of the loss of the DeTe contract the 3% threshold was deemed ambitious though still reachable)
- The management flagged unchanged strong fundamentals in Germany as well as an expansion of the Polish transportation infrastructure programme and reiterated the positive view on Benelux and Scandinavia. Given full order books a more selective bidding approach should counter cost inflation
- The risk profile of the Alto Maipo project could improve as STRABAG has signed a term sheet with the client AES Gener, which, among others, would secure the financing and STRABAG would take over the second lot

We maintain the BUY rating but have lowered the target price to EUR 38 from EUR 41.5. The reduction reflects the loss of the facility management contract with Deutsche Telekom as of 2019e on the one hand as well as slightly lower cash flow/higher net debt projections on the other. We think that the 3Q results again provided evidence of the strong trading conditions in STRABAGs core markets, mirrored by a more upbeat FY 17 output target of EUR 14.5 bn and order backlog of ca. EUR 16 bn (+7%). The management flagged unchanged strong fundamentals in Germany as well as an expansion of the Polish transportation infrastructure programme and reiterated the positive view on the Benelux region and Scandinavia. At the same time, availability of qualified staff and rising prices for subcontractors and raw materials prices remain the main challenges (particularly in DE but increasingly also in PL). While this limits the margin upside, the management does not envisage a squeeze as given full order books a more selective bidding approach should counter cost inflation (in line with our margin estimates of 3.3-3.4%). For FY 17e the company reinstated the EBIT margin target of at least 3% (upon announcement of the loss of the DeTe contract the 3% threshold was deemed ambitious though still reachable), which suggests a decent underlying development on the one hand but presumably also somewhat lower costs for the headcount reduction measures on the other. Lastly, the risk profile of the Alto Maipo project could improve as STRABAG has signed a term sheet with the client AES Gener, which, among others subject to approval of the clients banks, would secure the financing. Moreover, as STRABAG would take over the second lot it would have a markedly higher project volume.