Ahead of Fasadgruppen's Q3 report, we lower our estimates, as we believe the recovery is progressing more slowly than we earlier anticipated, especially in Norway due to weak new construction activity, and in the UK, where we see a risk of continued delayed project starts. However, we still expect modest growth and improved profitability in H2 compared with the weak first half of the year. Reflecting lower estimates and a higher cost of capital due to the rising interest rate outlook, which in turn increases the required risk premium, we lower our target price to SEK 23 per share (prev. SEK 26). However, following the continued decline in the share price, combined with our expectation of solid earnings growth in the medium term, driven by a strong order backlog, particularly in Clear Line, we believe the risk/reward profile remains attractive. Thus, we reiterate our Buy recommendation.

We expect modest growth in Q3

Fasadgruppen will publish its Q3 report on Thursday, November 12, and the earnings webcast can be followed here. We expect Q3 revenue of 1,411 MSEK, corresponding to organic growth of around 3% year-on-year. By segment, we expect Total Solutions (738 MSEK, 1% y/y) to be supported by a gradual recovery in the Swedish renovation market, while Norway continues to weigh on the segment. For Specialist Solutions (527 MSEK, 4% y/y), we expect continued solid development in Finland, while Clear Line (147 MSEK, 3% y/y) continues to be affected by project delays following the regulatory delays at the BSR. We expect adjusted EBITA of 127 MSEK, corresponding to a margin of 9.0%, as slightly higher volumes support fixed-cost absorption while continued margin pressure in Norway weighs on profitability. In addition, we will closely follow the leverage development, as net debt/EBITDA must be below 3.50x at the end of Q3'26 under the existing facility agreement. At the end of Q2'26, the ratio was 3.3x. We currently expect net debt/EBITDA to amount to 2.7x at the end of 2026, and we are therefore not overly worried about the leverage. However, the headroom is limited, and we believe margin improvement and the seasonal release of working capital in H2 will be key to creating headroom against the tightening thresholds.

Estimates lowered on a slower recovery

We have lowered our 2026 revenue estimate by around 2% and our adjusted EBITA estimate by around 9%, as we take a more cautious view of the pace at which the order backlog is converted into revenue, particularly at Clear Line. We have also lowered our 2027–2028 estimates, with revenue down by around 3% and adjusted EBITA by 4–5%, given the slower recovery and a less supportive interest rate outlook. Over the medium to long term, we continue to believe Fasadgruppen is well positioned to deliver solid organic growth, but we would like to see clearer evidence of a recovery before taking a bolder view.

We lower our target price but reiterate our Buy recommendation

We believe that the fair value of Fasadgruppen's share is SEK 23-28 per share (prev. SEK 26-32), supported by a combination of earnings multiples (adj. EV/EBITA ~8-9x, adj. P/E ~10-12x), which are based on the company's historical valuation and peers, as well as our DCF value. The fair value range has been lowered due to our reduced estimates and higher cost of capital. Our valuation relies on improved order backlog conversion translating into growth and a gradual margin recovery. Given the uncertain market environment, rather limited visibility into the ongoing turnaround, and the decline in return on capital in recent years, we lean towards the lower end of our valuation range. As a result, we lower our target price to SEK 23 per share (prev. SEK 26). However, despite our estimate revisions, the continued decline in the share price means that our total expected return is well above our required return, and we reiterate our Buy recommendation.