Last Update 15 Jul 26
Fair value Decreased 7.95%NCC B: Extra Dividend And New Nordic Projects Will Support Upside
The analyst price target for NCC has been adjusted from SEK 220 to SEK 202.5 as analysts incorporate updated assumptions for fair value, discount rate, revenue growth, profit margin and future P/E in their valuation work.
What’s in the News for NCC
- NCC has been commissioned by Vestland County Council to build the Atløy Link in Norway, a turnkey infrastructure project including three bridges and associated roads. The project is valued at approximately SEK 1,400 million and will be registered in the third quarter of 2026 in the NCC Infrastructure business area. (Source: Client Announcements)
- NCC will construct new schools and sports halls in Norway and Sweden, including projects for Nesodden Municipality and for EdetHus AB and Lilla Edet Municipality. Each project has an order value of approximately SEK 340 million and is scheduled for completion by 2028. (Source: Client Announcements)
- NCC has several large residential and water infrastructure renovation and expansion projects in Sweden. These include refurbishment and new loft apartments in Upplands-Bro with an order value of approximately SEK 300 million, and remodeling of the Kärreberg water treatment plant in Falkenberg valued at approximately SEK 220 million. (Source: Client Announcements)
- NCC has secured multiple industrial and public building contracts across Finland and Norway. These include modernization work for Hiab Finland Oy, a new elementary school in Porvoo, and refurbishment of the National Archives of Finland, with individual order values of approximately SEK 185 million, SEK 270 million and SEK 480 million respectively. (Source: Client Announcements)
- NCC announced an extra dividend of SEK 2.00 per share for the 2025 fiscal year, approved at the 2026 AGM, with a record date of May 7, 2026 and expected payment on May 12, 2026. (Source: Special Dividend Announced)
Valuation Changes for NCC
- Fair Value: SEK 220.0 to SEK 202.5, a moderate downward revision to the valuation reference point.
- Discount Rate: 7.58% to 7.79%, a small increase in the rate used to discount NCC cash flows.
- Revenue Growth: 5.33% to 6.14%, indicating slightly higher expected SEK revenue growth in the model.
- Net Profit Margin: 4.08% to 4.13%, a marginal uplift in projected profitability for NCC.
- Future P/E: 10.27x to 9.32x, a modest reduction in the earnings multiple assumed for future periods.
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 6.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 0.1% today to 4.1% in 3 years time.
- Analysts expect earnings to reach SEK 2.7 billion (and earnings per share of SEK 18.9) by about July 2029, up from SEK 78.0 million today.
- 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 9.4x on those 2029 earnings, down from 216.8x today. This future PE is lower than the current PE for the GB Construction industry at 17.5x.
- Analysts expect the number of shares outstanding to grow by 0.21% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.79%, 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 SEK202.5 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 SEK240.0, and the most bearish reporting a price target of just SEK180.0.
- In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK64.5 billion, earnings will come to SEK2.7 billion, and it would be trading on a PE ratio of 9.4x, assuming you use a discount rate of 7.8%.
- Given the current share price of SEK172.9, the analyst price target of SEK202.5 is 14.6% 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.