Masterplast's situation has improved, but the turnaround in the construction industry is still pending
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We have revised our DCF model and earnings estimates for Masterplast (a Hungarian player in the insulation business with regional presence). We have lowered our 12-month target price to HUF 2552 (from HUF 3015 as of 01.08.2024), while we maintain our HOLD recommendation. The lower target price is primarily the result of a slower than expected rebound in the construction industry and due to shareholder dilution after the recent capital raise (~14.2% increase in share count).
Masterplast had a rather weak Q1 performance, with revenue being essentially flat compared to a similarly weak base period and it had an operating loss as well. On the upside, the EBITDA was positive and slightly higher YoY. While no turnaround can be seen yet in 2025, but there have been some positive signs here and there on a segment level (contribution of own-produced XPS and new revenue stream from the sale of Certified Energy Savings). The Home Renovation Program and the Rural Home Renovation Program may also have a positive impact on revenues in H2, and commercial production in the company’s new glass wool plant in Szerencs is scheduled to begin in Q3. We view these developments favourably, but the overall business outlook is still characterized by significant uncertainty .
The macroeconomic environment seems mixed: revenue-weighted GDP growth expectations in Masterplast’s countries point to a 1.8% increase in 2025 vs. 1.4% in 2024. However, this estimate was 3.1% a year ago and growth projections for later years are also slightly lower
The recent capital raise significantly improved the company’s liquidity situation (albeit at the cost of dilution). We think that Masterplast has enough liquidity to cover 2025 obligations provided that short-term working capital loans are rolled over. However, over the long-term the company’s cash generating ability must improve to be able to cover future obligations, notably bond repayments at the end of 2026
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