German slowdown delays recovery - Q3 review

Bonava reported Q3 segment sales of SEK2,216m and EBIT of SEK168m, 15% and 29% below our estimates, respectively. The EBIT margin was 7.6% versus our 9.1% forecast, although the R12M margin improved to 7.8% from 7.6% in Q2. Germany’s weaker outlook offsets the progress, however, and we cut our 2026–28e EPS estimates by 35–45%, reflecting lower German volumes and the reduced full-year guidance. We maintain our fair value range of SEK14–22, based on our unchanged normalised earnings scenario.

Germany delays the earnings recovery. Higher long-term interest rates are weighing on investor demand and slowing consumer sales, postponing production starts and revenue recognition. Management now expects c10% sales growth at constant currencies and a 7% EBIT margin for 2026, versus a respective 20–25% and 8–9% previously. Lower volumes weaken fixed-cost absorption and delay the margin recovery to 2027–28e, which drives our estimate cuts. The margin guidance excludes the expected SEK75m Q4 restructuring charge.

Production is growing, but conversion still uneven. Ongoing production increased 29% Y/Y to 4,931 units in Q3, with a 64% sales rate. Starts reached 947 units, including the 506-unit Norrbodahöjden project in Sweden. Sweden’s recovery and healthy Baltic demand provide support, although Q3 group EBIT included a SEK11m property revaluation gain. With German investor deals still uncertain, a larger production base has not translated into the earnings growth we previously expected.

Cash release next proof point. Net debt was SEK4.8bn and cash flow before financing and tax was SEK-536m. c1,000 expected Q4 handovers should reduce debt materially. Bonava says German cost measures should see savings of cSEK50m in 2027 and SEK100m annually thereafter. We forecast 10% sales growth and an 8% EBIT margin in 2027. The recovery story remains intact, in our view, but depends on profitable starts and sustained cash conversion.