Last Update 05 Jun 26
NCC B: Extra Dividend And Nordic Project Wins Will Support Upside
Analysts have kept the NCC price target steady at SEK220, citing slightly adjusted assumptions for the discount rate, revenue growth, profit margin and future P/E as the main drivers of the unchanged view.
What's in the News
- NCC has been contracted by Sydvatten AB to build a fully equipped pumping station with backup power at the Ringsjöverket waterworks in Skåne, Sweden. The construction project is valued at about SEK 170 million and will be recorded in NCC Infrastructure orders in Q2 2026. Source: Company client announcement.
- NCC has signed 12 one-year asphalt contracts with the Norwegian Public Roads Administration and several Norwegian counties, totaling about SEK 680 million. The contracts feature CO2-weighted procurement criteria and will be recorded mainly in the NCC Industry business area in Q1 and Q2 2026. Source: Company client announcement.
- NCC has been commissioned to construct the Peippo elementary school in Porvoo, Finland, a partnering project of about 7,000 square meters for roughly 450 students. The order value is around SEK 270 million and will be booked in NCC Building Nordics in Q2 2026. Source: Company client announcement.
- Shareholders at the May 5, 2026 AGM approved an extra dividend of SEK 2.00 per share for the 2025 fiscal year. The record date is May 7, 2026, and payment is expected on May 12, 2026. Source: Company AGM resolution.
- NCC has been engaged to refurbish and remodel the historic National Archives main building in Helsinki for Senatfastigheter. The project, focused on conservation and low carbon solutions, has a value of SEK 480 million and will be recorded in NCC Building Nordics in Q2 2026. Source: Company client announcement.
Valuation Changes
- Fair Value: SEK220.0 per share, unchanged from the previous SEK220.
- Discount Rate: reduced slightly from 7.64% to 7.61%, reflecting a modest adjustment to the risk assumptions used in the model.
- Revenue Growth: trimmed slightly from 5.43% to 5.33%, indicating a more cautious view on future SEK revenue expansion.
- Net Profit Margin: raised modestly from 4.00% to 4.08%, pointing to a slightly higher expected level of SEK earnings relative to sales.
- Future P/E: eased from 10.47x to 10.28x, suggesting a marginally lower valuation multiple applied to projected earnings.
Key Takeaways
- Strong financial position and low net debt support strategic M&A initiatives for future revenue growth and margin expansion.
- Focus on sustainability and CO2 reduction targets could enhance operational efficiencies and improve profit margins.
- Strengthening of the Swedish Krona, a muted property market, and competitive pricing pressures threaten NCC's revenues, profits, and financial projections.
Catalysts
About NCC- Operates as a construction company in Sweden, Norway, Denmark, and Finland.
- The company's strong financial position and balance sheet readiness for selective mergers and acquisitions (M&A) can act as a catalyst for future revenue growth and margin expansion.
- Positive outlook for key contracting segments such as water treatment, energy generation, and infrastructure suggests potential for sustained revenue growth.
- Low net debt level provides financial flexibility, contributing to a positive outlook for earnings stability and potential margin improvement.
- Completion and high letting ratios in the property development portfolio, particularly the Cleantech project in Finland, could drive future earnings contributions once market conditions improve.
- Ongoing progress towards sustainability and new CO2 reduction targets may enhance operational efficiencies, potentially leading to improved profit margins.
NCC Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?
- Analysts are assuming NCC's revenue will grow by 5.3% annually over the next 3 years.
- Analysts assume that profit margins will increase from 0.2% today to 4.1% in 3 years time.
- Analysts expect earnings to reach SEK 2.6 billion (and earnings per share of SEK 19.09) by about June 2029, up from SEK 92.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK1.8 billion.
- In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 10.4x on those 2029 earnings, down from 196.4x today. This future PE is lower than the current PE for the GB Construction industry at 18.2x.
- 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 7.61%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?- The strengthening of the Swedish Krona negatively impacts the order backlog when translated, potentially affecting reported revenues.
- The Property Development unit hasn't recognized any sales of properties this quarter, and a muted property transaction market could further hinder revenue and earnings growth.
- Seasonally low EBIT due to slow first-quarter sales might not recover quickly if market demand changes, affecting overall profitability.
- Uncertain prospects for divesting the Industry business could impact financial results if expectations for this sale are built into future earnings projections.
- Potential pricing pressure from smaller competitors on less complex projects in Sweden and Finland could lower profit margins if significant cost control isn't maintained.
Valuation
How have all the factors above been brought together to estimate a fair value?
- The analysts have a consensus price target of SEK220.0 for NCC 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 SEK250.0, and the most bearish reporting a price target of just SEK195.0.
- In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK63.4 billion, earnings will come to SEK2.6 billion, and it would be trading on a PE ratio of 10.4x, assuming you use a discount rate of 7.6%.
- Given the current share price of SEK184.8, the analyst price target of SEK220.0 is 16.0% 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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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.