Analysts and analyst reports

Analysts with coverage on Kreate

• Mika Karppinen, Danske Bank
• Olli Koponen, Inderes

Danske Bank’s analyst reports

Ahead of Q4 24 results due 5 February: Kreate’s profitability should have continued to improve in Q4 and the gradually improving order intake should turn volumes back to growth path again in 2025. In our view the continuing margin recovery is the biggest trigger for the share in the short term. The recently announced tender wins in railway projects indicate clearly improving sales growth rates for the coming years. Valuation discount to peers is sizeable and has widened further recently. We have a fair value range of EUR8.0-9.4 for the share

Margin improvement while volume outlook is also starting to improve. Kreate should continue to report improving profitability in Q4. The completion of older weaker projects combined with the stabilizing cost inflation should continue to support Kreate’s margin development. Kreate’s sales have been declining in recent quarters, burdened by the weakened Finnish construction market even though in the infra segments volumes have been holding up better. However, the gradually improving tendering activity and the already announced tender wins should turn the volumes to the growth path again in 2025. Q4 order intake should already include EUR 58m order from Koskela tramway depots, improving volume outlook. We believe that the tendering activity is gradually starting to pick up also in the building foundation works segment, which is supportive for the whole construction industry in Finland in 2025.

Q4 expectations. We expect Kreate’s revenues to have continued to decline in Q4 burdened by the weakened order backlog. We forecast Q4 revenue decline of 8% y/y with EBITA margin of 4.2% versus previous year’s 3.4%. Our estimates are quite well in line with LSEG Data & Analytics consensus. We believe that the margins are supported by the easing burden from inflation and the completed problem projects. We expect Kreate to guide growing EBITA for 2025 vs. 2024. We forecast dividend proposal of EUR 0.47 per share.

Valuation. Kreate trades at 2024E EV/EBITA of 9x, a 31% discount compared to the peer group. The valuation discount has been further widening in recent months, which is not justified in our view due to improving volume outlook.

Read the whole analyst report:

Post Q3 2024 (25 October 2024)
Post Q2 2024 (16 July 2024)
Post Q1 2024 (26 April 2024)

Inderes’s analyst reports

13 Jan 2025: We lower Kreate’s target price to EUR 8.00 (was EUR 8.80) but raise our recommendation to Accumulate (was Reduce). In 2024, we expect Kreate to have successfully improved margins, and in 2025, revenue growth will drive earnings growth. However, the short-term market outlook is weak (H1’25) and we have slightly lowered our forecasts. However, after the share price decline, we believe the earnings outlook is attractive given the improving market and earnings levels of Kreate in the coming years.

Full-year margin improvement confirmed in final quarter
In 2024, Kreate was able to reverse the trend of its earnings in the right direction, i.e., upwards. For the full year, we expect Kreate’s EBITA margin to improve to 3.2% from 2.4% in the same period last year and EBITA to reach 8.7 MEUR (2023: 7.8 MEUR). However, due to a weaker market and a lower order book (large projects completed), we expect revenue in FY2024 to decrease by 14% to 276 MEUR. Kreate expects revenue in the range of 270-300 MEUR and EBITA in the range of 8-11 MEUR. In other words, our estimate is at the bottom of the range.

For Q4, we expect a decline in revenue (-6%) and a slight improvement in the EBITA margin (3.6% vs. 3.4% in Q4’23). We have slightly lowered our earnings forecasts ahead of the financial statements on February 5, 2024, as we estimate that market activity continued to be weak in Q4 and that profitability may have been slightly impacted by the cost of repairing the Kirjalansalmi bridge. However, the impact of tail effects from old cost-intensive projects in the comparison period should now contribute to the improvement in the last quarter of 2024. Growth and profitability improvement expected for the guidance

For 2025, we expect revenue to increase by 4% to 287 MEUR and adjusted EBITA to increase to 10.2 MEUR (EBITA %: 3.6%). Revenue growth will be driven by the rail projects to be added to the order book in the spring, which should significantly boost top line growth in the second half of the year. However, the beginning of the year will still be challenging in terms of volumes. Profitability will be positively impacted by increasing volumes and easing cost pressures. In line with our forecasts, Kreate should guide for at least a modestly increasing revenue and improving earnings. We also see a stronger order book in 2025 and a recovering market driving the company to profit growth in the following years (2026-2027). There is a risk that project development phases will be extended, projects will be postponed or that the weak market outlook will continue beyond H1’25 into the fall.

Moderate upside in valuation
The valuation of Kreate is high for 2024 due to the low earnings level but becomes much more attractive in 2025-2026 (25-26e: EV/EBIT: 9x, P/E: 11x), when the earnings level also starts to normalize (EBITA %): 4%). Compared to our acceptable valuation (EV/EBIT: 10-12x, P/E: 10-12x), the stock would have an upside of 5%. The dividend is expected to increase by one cent to 49 cents in 2024, resulting in a strong dividend yield of 7%. Based on debt maturities and cash position, Kreate has the ability to pay a dividend and aims to increase it each year. However, we do not give the dividend much weight in our valuation, and we do not believe a cut would be a significant disappointment given the potential for growth investments. The DCF calculation, which better reflects the long-term potential, is also well above the current price (EUR 10.3), which supports our recommendation.

Company analysis prior to FY 2024 by Inderes (13 January 2025)
Company analysis Q3 2024 by Inderes (28 October 2024)
Extensive report on Kreate by Inderes (1 October 2024)
Company analysis Q2 2024 by Inderes (17 July 2024)
Company analysis Q1 2024 by Inderes (29 April 2024)
Company analysis Q4 2023 by Inderes (1 Feb 2024)
Extensive report on Kreate by Inderes (28 Nov 2023)

The analyses produced by the aforementioned analysts are independent and impartial views of those following Kreate. Kreate is not responsible for the veracity, completeness or use of the information by anyone. The information does not represent the views, forecasts or estimates of Kreate or its management and is not intended to be investment advice. Kreate is in no way responsible for your use of the content provided on the site.