Purmo Q3'24: Already on the way out of the stock market

Translation: Original published in Finnish on 10/23/2024 at 8:00 am EEST.

Purmo is now 98% owned by Grand Bidco following the tender offer in August and the redemption proceedings for the remaining shares are underway. As a result, the company will be delisted in the coming months. We have now updated our forecast based on the company's Q3 report, but our target price is at the level of the offer. We reiterate our Reduce recommendation on the stock. 

Q3 revenue as expected, result somewhat soft

Purmo's Q3 revenue was slightly down year-on-year, along with the Climate Solutions segment, and broadly in line with our expectations. Adj. EBITDA was below our expectations and the comparison period, also due to the underperformance of the Climate Solutions segment. Purmo's efficiency program continued to support margin development, but on the other hand, further declining volumes, costs of production transfer as well as cost inflation weighed on the result. The efficiency program is expected to deliver annual savings of 50 MEUR by the end of the year, of which 47 MEUR have already been realized in Q3.

Guidance unchanged - acquisition supported projections, earnings forecasts down organically

Purmo reiterated its guidance and expects adjusted EBITDA for the full year 2024 to be at the same level or above compared to 2023 (92.3 MEUR). After 9 months, the result is 4.5 MEUR below the comparison period. The company's definition of "at the same level" is +/−5%. Purmo commented that there are signs of a pick-up in the market, which, together with the progress of the efficiency program, supports the achievement of the guidance. In addition, we estimate that the acquisition made at the beginning of Q4 will already provide some support for this year's result. We lowered our profitability forecasts for this year and next year organically, but with the addition of the Unitherm acquisition in early October, our forecasts for 2025-26 increased. For this year, our adj. EBITDA forecast is essentially at last year's level (which was also the earnings level in 2022). As the company is exiting the stock market, we have removed our dividend forecasts for the coming years. However, our forecast does not take into account the changes in the company's balance sheet structure resulting from the change in ownership.

Redemption proceedings and delisting underway

Purmo’s share redemption proceedings are underway, and the company has announced its intention to delist from the stock exchange as soon as possible. This is expected to occur in the coming months, and we believe that the Q3 report will be Purmo's last as a public company. Our coverage of Purmo will also naturally end at the latest when trading stops. Our target price is set at the price proposed by the main shareholder Grand Bidco in the redemption proceedings (which is the same as the price paid in the tender offer), adjusted for the dividend installment to be paid this week. The arbitral tribunal may also set a higher redemption price for the share, but the price will only be determined after trading in the share has ceased. We have commented extensively on the earlier stages of the tender offer in our previous reports and comments.