NYAB Q4'24: Strong execution across the board

NYAB’s Q4 report was stronger than expected across the board. The market situation in Sweden remained favorable for NYAB’s operations and the mild winter conditions in the Nordics had a positive effect on the overall business momentum. However, the order backlog growth lagged clearly behind revenue, partly due to the high volumes delivered in Q4. This, coupled with lower-than-expected revenue from the soon-to-be integrated businesses from Dovre, resulted in only minor estimate changes for the next years. That said, we continue to see the expected return at a very attractive level, driven primarily by the earnings growth we forecast for the coming years. Hence, we reiterate our Buy recommendation and maintain our target price of SEK 6.8.

Q4 exceeded our expectations

NYAB's revenue grew by 33% year-on-year in Q4 to 117 MEUR, which was well above our forecast (101 MEUR) and primarily driven by the realization of its strong order backlog, the completion of projects carried over from Q3, and favorable weather conditions. Geographically, Sweden continued to benefit from favorable market conditions and grew 48% year-on-year, while the development in Finland remained sluggish, with reported revenue down 1% year-on-year. The margin level (EBIT) also exceeded our expectations at 10.5% (Q4’23: 7.5%, Inderes est. 9.7%), reflecting the higher-than-expected volumes in the quarter combined with sustained cost efficiency. The company reiterated in the Q4 report that the market conditions in Sweden remain favorable, and that Finland is still experiencing some slowness (due to weak overall economic development and postponements of renewable energy investments) but also recently shown signs of improved activity. Furthermore, the company’s dividend proposal of EUR 0.01 was in line with our estimates.

But changes in our estimates are limited

In light of the report, which clearly exceeded our expectations, and the current market outlook, the forecast changes were relatively minor. The primary reason behind this is the modest increase in the order backlog (+10% y/y) relative to revenue growth, as well as lower-than-expected revenue from the acquired Dovre businesses. For 2025, we expect the company’s revenue to grow 41% (of which 11% organically) to 487 MEUR (was 494 MEUR, FY24: 330 MEUR). Adjusted EBIT remained unchanged at 33 MEUR, reflecting a slight increase in the EBIT margin to 6.8% (FY2024: 7.3%). The year-on-year decline in the EBIT margin is primarily due to the integration of the lower-margin Project Personnel business. Estimate changes for the coming years are also minimal at this stage. However, we recognize that the potential but yet-to-be-confirmed phase two order for the Uppsala Tramway project could put upward pressure on our current estimates if secured. Looking at the bigger picture, we expect NYAB to continue to grow at a decent pace beyond 2025 (26-28e: 9-6%). Similarly, we expect the margin to increase closer to the target level (26-28e adj. EBIT%: 6.8-6.9% vs. target >7.5%), driven, among others, by revenue growth and implemented measures to smooth out the seasonality.

We see a strong upside in the stock

Based on our estimates, the adjusted P/E ratios for 2025 and 2026 are 14x and 12x, while the corresponding EV/EBIT ratios are 10x and 8x. Given our accepted multiple range (P/E: 12x-16x, EV/EBIT: 11x-15x), we continue to see significant upside in current and next year’s multiples, particularly on the EV-based multiple, which reflects the strong balance sheet. Our range of expected total returns over the medium term is also above our required return for the stock. Further support for the strong positive recommendation comes from our sum-of-the-parts model, which now stands at SEK 6.5-7.7 (prev. SEK 6.3-7.6).