Fasadgruppen's Q3 operational earnings beat our expectations, driven by a strong performance in Specialist Solutions, while revenue was in line with our estimates. In our view, the report shows continued early signs of a recovery, although the pace remains slow, especially in Total Solutions. Despite the beat, we kept our medium- to long-term estimates largely unchanged, as we believe that a gradual recovery is already reflected in our current estimates. We consider the roughly 12% share price increase following the report reasonable. Given the still low valuation multiples (2026-2027 adj. EV/EBITA of around 6-7x), we continue to see solid upside potential and believe the risk/reward profile remains attractive. As a result, we reiterate our Buy recommendation and target price of SEK 23 per share.

Specialist Solutions drove a clear earnings beat

Q3 revenue amounted to 1,415 MSEK, in line with our estimates, corresponding to organic growth of 2.4% y/y. Specialist Solutions (556 MSEK, +12.1% organic y/y) was the clear outperformer, largely driven by Finland. Total Solutions (727 MSEK, -0.6% y/y) was held back by Denmark, which faced tough comparables, and a slow recovery in Sweden and Norway. Clear Line (132 MSEK) fell short of our forecast as bottlenecks in the BSR approval process continued to delay project start-ups. Adjusted EBITA of 145 MSEK clearly exceeded our expectation of 127 MSEK, corresponding to a 10.2% (9.9%) margin, mainly driven by Specialist Solutions. Net debt/EBITDA was unchanged at 3.3x, but we expect it to decline going forward, supported by improved profitability. However, the headroom against the covenant thresholds remains limited, and leverage is a key risk to the investment case.

Short-term estimates up slightly, long-term view unchanged

Following the Q3 beat, our short-term operational earnings estimates increased slightly, while we kept our medium- to long-term estimates largely unchanged, as we already expect a gradual recovery, which we believe is reflected in our current estimates. Over the medium to long term, we continue to believe Fasadgruppen is well positioned to deliver solid organic growth, supported by efficient project execution, continued investment in UK fire safety remediation and increasing demand for energy-efficient renovations. Reflecting this, we estimate organic growth of around 5% annually in 2027-2029. We expect revenue growth to drive operating leverage, with Clear Line becoming an increasingly important contributor to group profitability given its structurally higher margins. However, a persistently high interest rate environment, or further steep rate hikes, is a key risk to our estimates and the investment case. It could make property owners and customers even more hesitant to commit to new renovation and construction projects, delaying the demand recovery, while also keeping financing costs higher for longer given the company's still relatively high leverage.

We reiterate our Buy recommendation and target price

We believe that the fair value of Fasadgruppen's share is SEK 23-28, 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. Despite the share price increase, we believe the valuation remains low, although the upside relies on continued improvement in order backlog conversion, a gradual margin recovery and further deleveraging. Given the uncertain market environment, still limited visibility into the ongoing turnaround, and declining returns on capital in recent years, we lean towards the lower end of our valuation range. As such, we reiterate our target price of SEK 23 per share and Buy recommendation.