Company Reports

Narrow-moat Vinci’s first quarter results reaffirm our investment thesis that the business provides investors with defensive growth at an undervalued price. First-quarter organic sales growth of 4% was broad-based across its operating segments, with the ongoing recovery in its airports business making it the standout division. Its order backlog is at a record high and provides visibility into 14 months of revenue, which adds to the defensiveness of its concessions business. While no operating profit details were provided, we anticipate its record order book will allow Vinci to be selective about future construction and energy projects, which combined with increasing customers at its airports division will help deliver margin expansion. Shares are trading at a 15% discount to our EUR 133 fair value estimate, which we maintain.

Vinci’s strategy to extend the maturity of its concession portfolio will help the business earn maintainable economic profits. The group's portfolio of long-dated concession assets such as toll roads and airports (70% of operating profits) are difficult to replicate and provide a stable source of income.

We’re raising Vinci’s fair value estimate to EUR 133 from EUR 122 following its impressive fiscal 2023 results, which we expect can be maintained in future. Vinci’s portfolio of high-quality concession assets and its strong contracting order book generated a record EUR 6.6 billion of free cash flow, materially beating management’s guidance of between EUR 4 billion and EUR 4.5 billion provided at the start of fiscal 2023. Guidance of further earnings growth in fiscal 2024 confirms the business’ stable source of earnings and attractive end-markets. Shares currently offer investors 11% upside to our revised fair value estimate.

We expect Vinci's Cobra IS division will achieve its EUR 7.5 billion 2025 revenue target at a 7.5% operating margin, which was announced at Vinci’s capital markets day dedicated to the acquired subsidiary. Its record EUR 14.9 billion order backlog will underpin the division's ability to deliver its target. The business also plans to add 1.5 gigawatts of renewable assets annually, targeting 12 GW by 2030, consisting mostly of solar farms, which will add to Vinci’s portfolio of long-dated toll-road and airport concession assets. We maintain our EUR 122 fair value estimate and narrow moat rating for Vinci. Shares are marginally undervalued.

Narrow-moat Vinci grew revenue by 9% during the third quarter, supported by the ongoing recovery in passenger numbers across its airports. The defensiveness of its Concessions business, which tends to be resilient to macroeconomic conditions, was supported by impressive organic sales growth at its Energies and Cobra IS segments—10.6% and 13.5%, respectively. Management raised its outlook for its Autoroutes business and expects airport passenger numbers in the fourth quarter to be similar to prepandemic levels, which coincides with its upgraded free cash flow guidance of at least EUR 4.5 billion from between EUR 4.0 and EUR 4.5 billion. Shares are trading marginally higher but remain undervalued to our EUR 122 fair value estimate, which we maintain.

Vinci’s strategy to extend the maturity of its concession portfolio will help the FIRM earn durable excess returns. The group's business models rests on managing and operating critical infrastructure for economies such as motorways and airports, via long-dated concession contracts.

Narrow-moat Vinci reaffirmed the resilience of its business, delivering 13% revenue growth during first-half 2023 driven by a 58% (32% like-for-like) increase in the airport business as passenger numbers increased at a faster pace than expected. The strong recovery in the airport business shouldn't detract from the equally impressive double-digit growth in its energy business, as well as margin expansion for Vinci energies and Cobra IS. We think both businesses can maintain growth rates ahead of gross domestic product, supported by their healthy order books. We marginally raise our fair value estimate to EUR 122 from EUR 116 to reflect a quicker-than-anticipated recovery in airport passenger numbers, which combined with cutting costs during the pandemic have resulted in a significant uplift in profitability. We view management’s unchanged guidance of a slight increase in net income as conservative, especially in light of the 13% increase in net income during the first half. Shares are trading at a 10% discount to our revised fair value.

Narrow-moat Vinci reported impressive organic revenue growth of 14% during the first quarter, highlighting the defensive characteristics of the business. Growth was broad-based across operating segments, however, the ongoing recovery in passenger numbers across its airports, albeit still 12% below prepandemic levels, continues to outperform the remainder of the business. Its more cyclical construction segment has remained largely shielded from higher interest rates for the time being, due to its involvement in numerous major infrastructure projects and a healthy order backlog. Management confirmed guidance provided at the end of 2022. Shares are trading at a slight discount to our EUR 116 fair value estimate, which we maintain.

Vinci’s strategy to extend the maturity of its concession portfolio will help the FIRM earn durable excess returns. The group's business models rests on managing and operating critical infrastructure for economies such as motorways and airports, via long-dated concession contracts.

Our biggest takeaway from narrow-moat Vinci’s impressive full-year 2022 results was its record free cash flow generation of EUR 5.4 billion, an increase of 3% year over year, comfortably exceeding consensus expectations. Vinci remains well positioned in 2023 and guided for top-line and profit growth. Shareholders have been rewarded following Vinci’s strong full-year results and outlook; the dividend is being increased 14% to EUR 4.0 per share. We plan to upgrade our forecasts, but not enough to materially affect our EUR 106 fair value estimate. Shares are fairly valued.

Narrow-moat Vinci continued its strong momentum in 2022, reporting 12% like-for-like revenue growth, or 26% including acquisitions during the third quarter. We believe the market is underestimating the group’s outlook due to macroeconomic uncertainty, which provide investors with an opportunity to acquire shares at a 16% discount to our EUR 106 fair value estimate. We anticipate the group is on track to deliver close to EUR 4 billion in annual free cash flow, which translates into an attractive 7% free cash flow yield at current levels. We expect free cash flow will remain resilient due to the defensive characteristics of its toll-road business, which has inflationary-linked cash flows, further upside in the recovery at its airport, and a healthy contracting order book, which provides 15 months of visibility.

Vinci’s strategy to extend the maturity of its concession portfolio will help the company earn durable excess returns. Vinci’s business models rests on managing and operating critical infrastructure over long concession contracts, such as motorways and airports. We appreciate the company’s actions to increase the portion of its concession-driven revenue, over its short-cycle contracting business.

Narrow-moat Vinci delivered strong first-half results, reporting organic revenue growth of 11.8% or 26.1% including acquisitions. Impressively, operating profit grew by 81% largely driven by the airport division's return to healthy profitability. All other operating segments were also able to deliver EBIT margin expansion, highlighting the group’s defensive characteristics through its portfolio of long-dated concession assets such as toll roads and airports. We plan to tweak our short-term forecasts slightly for better-than-expected airport segment profitability, but don’t expect to materially change our EUR 101 fair value estimate. We view shares as slightly undervalued.

Narrow-moat Vinci’s first-quarter trading update illustrated the resilience of the company’s business model with organic revenue growth coming in at 12% excluding the Cobra IS acquisition and reported revenue growth of 26% if we include this purchase. Most of the growth came from the concessions segment, which grew 33% against a low comparative due to the easing of travel restrictions, benefitting Vinci’s portfolio of airports and French toll roads. We reiterate our EUR 101 fair value estimate and view shares as slightly undervalued. Vinci offers investors defensive characteristics through its portfolio of long-dated concession assets such as toll roads and airports, which are difficult to replicate, protected against inflation through contract-linked tariffs and provide a stable source of income. Market jitters over the outcome of the French elections has offered investors an attractive entry point.

Vinci’s strategy to extend the maturity of its concession portfolio will help the company earn sustainable excess returns. Vinci’s business models rests on managing and operating critical infrastructure over long concession contracts, such as motorways and airports. We appreciate the company’s actions to increase the portion of its concession-driven revenue, over its short-cycle contracting business.

Narrow-moat Vinci enjoyed a recovery across all end markets, albeit against a weak comparator, reporting 14% revenue growth, which was in line with our expectations. Investors will benefit more comparing the figure with 2019 levels, which is 2.8% higher despite Vinci’s prolonged recovery from airports. However, it was noticeable the airport segment reported a profit during the second half of 2021, which will allow Vinci to perform on all cylinders during the current year when air traffic improves. A recovery in industrial activity and demand for construction services were the main drivers behind the recovery, leading to a record order book and free cash flow growth of 32% to EUR 5.3 billion. Vinci’s reputation as a stable provider of capital was maintained. A EUR 2.9 per-share dividend was proposed, an increase of 32%. We reiterate our EUR 90 fair value estimate and view shares as fairly valued.

Our investment thesis for narrow-moat Vinci remains firmly intact after a solid third-quarter sales update. Vinci has benefited from a strong construction market and a recovery in traffic across its Autoroutes business, which managed to offset weakness in the airports business due to ongoing travel restrictions. Third-quarter revenue grew 8% against a weak prior year. Year-to-date revenue grew 16.5% to EUR 35.8 billion and is impressively 2.8% higher than 2019. Full-year guidance was reaffirmed. We maintain our EUR 90 fair value estimate despite making minor updates to our forecasts.

Vinci’s strategy to extend the maturity of its concession portfolio will help the company earn sustainable excess returns. Vinci’s business models rests on managing and operating critical infrastructure over long concession contracts, such as motorways and airports. We appreciate the company’s actions to increase the portion of its concession-driven revenue, over its short-cycle contracting business.

Narrow-moat Vinci has benefited from a strong construction market that managed to offset weakness in the Concessions business due to ongoing travel restrictions. First-half group revenue grew 22% against a weak prior year but is impressively 4% higher than a cleaner 2019 comparative that was unaffected by the pandemic. We were not surprised by management raising guidance for the Contracting segment, which is expected to exceed 2019 levels. Having already incorporated this into our estimates, we maintain our EUR 90 per share fair value estimate.

There were no surprises in narrow-moat Vinci’s first-quarter trading statement, which results in us retaining our EUR 90 fair value estimate. Limited passenger activity across Vinci’s airport network did not deter the group from generating 5% organic sales growth. While short-term visibility into traffic across Vinci’s concession assets remains unclear, our long-term investment thesis is intact. Order book growth of 21% to a record high of EUR 45.8 billion for Vinci’s contracting segment adds greater visibility to the more cyclical side of the business and increases the defensiveness of the group. Shares are currently trading in line with our fair value estimate.