Company Reports

Bouygues is a conglomerate with a disparate number of businesses. In its construction segment it develops big infrastructure projects such as motorways, rails, power plants, and tunnels, among other things. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable so when difficult times come it can adjust its cost base rapidly (although this also prevents it from benefiting from operating leverage in times of high demand). Both Bouygues Construction and Inmobilier (residential construction) have high exposure to France, as a significant portion of their business comes from there. In 2022, Bouygues acquired Equans for EUR 7.1 billion, significantly expanding its construction business.

Bouygues reported strong 2023 results with sales up 26% year on year and up 3% on an adjusted basis, led by strong performance in Equans and its construction business. Prices were up 5.5% in early trading on Feb. 27. The Equans backlog, which includes Bouygues energies and services, fell 4% to EUR 24.7 million, but reflects its selective approach, which started in 2023, toward more profitable projects and something we look favorably on. EBIT for 2023 was EUR 545 million, an increase of 31% year on year. The margins also expanded 60 basis points to 2.9%, with the estimated backlog underlying the margin indicating possible future improvements.

Bouygues is a conglomerate with a disparate number of businesses. In its construction segment Bouygues develops big infrastructure projects such as motorways, rails, power plants, and tunnels, among other things. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable so when difficult times come it can adjust its cost base rapidly (although this also prevents it from benefiting from operating leverage in times of high demand). Both Bouygues Construction and Inmobilier (residential construction) have high exposure to France, as a significant portion of their business comes from there. In 2022, Bouygues acquired Equans for EUR 7.1 billion, significantly expanding its construction business.

Bouygues’ third-quarter results exhibited continued strong demand in its construction business, with the backlog improving by 8% to EUR 29.8 billion. Shares are up 4.2% in early trading.

Bouygues' second-quarter results demonstrated strong demand in its construction business, with the backlog improving by 9% to EUR 30.8 billion (10% at constant exchange rates). Notably, the civil works' backlog surged by 13%, primarily fueled by a 29% increase in international building projects. Colas, the road division, experienced an 11% backlog increase, driven by remarkable 21% growth in rail projects and, to a lesser extent, a 5% rise in road projects. In contrast, Bouygues Immobilier's backlog declined by 21%, primarily due to reduced residential property reservations resulting from the impact of sharply higher interest rates. The construction division's EBIT was negative EUR 7 million, reflecting the seasonal nature of Colas' activities, and should recover in the second half. The group and business segments all confirmed 2023 guidance. We maintain our EUR 35 fair value estimate, with shares fairly valued currently. 

Bouygues' first-quarter results showed healthy demand, with sales increasing 4% on an organic basis. The backlog increased 6% organically to EUR 29.4 billion, driven by higher backlog at the construction and colas divisions, which was offset by a 20% decline in Bouygues’ residential business. Order intake in construction is doing well, with Bouygues booking in several sizable contracts, such as the Abidjan metro project (EUR 770 million) and a hospital in the U.K (EUR 330 million). In the residential segments things remain cooler, given the high interest rate environment has put on hold many residential projects. Management also commented its managing to pass through cost increases to its customers. EBIT fared well, mainly aided by Equans and the telecom division, setting a good start of the year for Bouygues. We are maintaining our EUR 35 fair value estimate, with shares being fairly valued at the moment.

Bouygues reported its full-year results, with sales up 4% organically at constant exchange rates and up 8% excluding the acquisition of Equans, which was closed in October 2022. Bouygues' backlog remained flattish year over year at EUR 33.7 billion. Colas, which saw a rocky start of the year due to higher energy and commodity costs and a lag to pass price increases to customers, recovered in the second half of the year, and management met its revised guidance of increasing profits at the divisional level. Bouygues' guidance for 2023 was conservative and slightly vague, aiming for flattish sales and “an increase” in operating profit, given the uncertain macroeconomic environment. We are maintaining our EUR 35 fair value estimate, with the shares offering little upside at this point.

Bouygues' third-quarter results continued to show healthy demand already seen during the first half of the year. Sales increased 4% organically year over year. The backlog increased 2% organically to EUR 34.2 billion, mainly driven by a higher backlog at its Colas division, which increased 19% at constant exchange rates. Colas’ operating profit was hurt during the first half of the year due to higher energy and commodity costs. The division has now caught up and increased prices for customers, resulting in improved fundamentals. The strong increase in sales (19% reported and 10% organic) has resulted in a strong increase in operating profit. Anyway, management has preferred to remain cautious, changing its 2023 outlook for Colas from a 4% operating margin target to “an increase in operating profit compared with 2022,” which seems achievable. Shares declined by 4% at the time of the writing on the Colas downgrade, but overall group guidance remains the same. We maintain our EUR 35 fair value estimate.

Bouygues is a conglomerate with a disparate number of businesses. In its construction segment Bouygues develops big infrastructure projects such as motorways, rails, power plants, and tunnels, among other things. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable so when difficult times come it can adjust its cost base rapidly (although this also prevents it from benefiting from operating leverage in times of high demand). Both Bouygues Construction and Inmobilier (residential construction) have high exposure to France, as a significant portion of their business comes from there.

Bouygues' second-quarter results continued to show good demand for its construction and services business. The backlog improved by 6% to EUR 35.1 billion, 1% at constant-exchange rates. By industry, civil works' backlog declined 5%, which was compensated by a 3% increase in energy works. Colas, the road division, had a 14% increase in its backlog and 9% organic sales growth. However, Colas' EBIT was the main detractor from group profitability, as it contracted sharply due to higher energy and commodity costs. Colas could not pass these costs on to customers, especially for the contracts booked before the price hikes. As we mentioned previously, and despite being correctly managed, Bouygues' engineering, procurement and construction businesses are at the mercy of external factors like the weather or price hikes, which can make profitability fluctuate sharply. In France, residential activity continued to perform strongly, while demand for commercial property remained weak, a comment we have already heard in previous quarters. We maintain our EUR 35 fair value estimate.

Bouygues is a conglomerate with a disparate number of businesses. In its construction segment Bouygues develops big infrastructure projects such as motorways, rails, power plants, and tunnels, among other things. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable so when difficult times come it can adjust its cost base rapidly (although this also prevents it from benefiting from operating leverage in times of high demand). Both Bouygues Construction and Inmobilier (residential construction) have high exposure to France, as a significant portion of their business comes from there.

No-moat Bouygues' first-quarter results showed sales growth of 3%, which did not flow to the profits due to the mix effects among the different divisions. In the construction business there was an uptick in demand, mainly driven by Colas (rail and roads), which was awarded several contracts like its EUR 650 million contract to build a metro line in Cairo, Egypt. The 12% backlog growth of Colas was offset by a minus 3% and minus 13% growth in the pure construction and real estate businesses, respectively. The decline in construction is explained by a strong first quarter last year, while the decline in real estate comes from cautiousness from commercial property customers. Guidance for 2022 is vague, with the company expecting growth in sales and operating profits, which means Bouygues would be above prepandemic levels by the end of 2022. We are maintaining our EUR 35 fair value estimate.

Bouygues closed 2021 on a good note, with overall sales up 7% organically compared with 2020 but more importantly at the same level as prepandemic 2019, which was management’s target. Guidance for the next year was very vague, we believe due to the uncertainty the integration of Equans brings, with the company aiming for “growth in sales and operating profit.” The only clear targets were set for the telecom business, where expectations are for sales growth of 5% and EBITDA (after leases) growth of 7%. Management’s confidence in its improved financial performance is also reflected on the dividend raise made, with a proposal of a EUR 1.80 dividend for fiscal 2021, higher than the EUR 1.70 seen since 2017. We are maintaining our EUR 35 fair value estimate.

No-moat Bouygues reported nine-month revenue of EUR 27.5 billion, up 9% on a like-for-like basis versus the same period last year, and in line with company-collected consensus estimates. Growth on a year-to-date basis slowed slightly from a strong first-half performance (up 17% organically) as third-quarter revenue last year already hit precoronavirus levels, forming a tougher comparable base. Guidance of full-year 2021 revenue and operating margin close to prepandemic levels were reiterated. We maintain our EUR 35 per-share fair value estimate and no moat rating.

Bouygues is a conglomerate with a disparate number of businesses. In its construction segment Bouygues develops big infrastructure projects such as motorways, rails, power plants, and tunnels among others. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable so when difficult times come it can adjust its cost base rapidly (though this also prevents it from benefitting from operating leverage in times of high demand). Both Bouygues Construction and Inmobilier (residential construction) have high exposure to France, as a significant portion of their business comes from there.

Bouygues confirmed the acquisition of Equans, a provider of technical installation and maintenance services, from Engie, for EUR 7.1 billion or 17.8 times EV/EBIT based on our estimates. Equans will add EUR 12 billion of revenue to Bouygues with a normalized EBIT of around EUR 0.4 billion (3.3% margin) according to our estimates, becoming Bouygues' largest business segment by sales and employees (EUR 16 billion and 96,000 employees) after combining it with its Energy and Services business. We believe the acquisition price to be high for a business with no competitive advantages and are trimming our fair value estimate to EUR 35 per share from EUR 39 per share to account for the high price paid compared with our estimate for the value of this business, which is based on a discounted cash flow methodology and a comparison with peers from the sector. Bouygues' shares are down 5% at the time of the writing, we believe reflecting the high price paid. Our no-moat rating remains.

No-moat Bouygues' first-half results were slightly ahead of company-provided consensus expectations, recording strong growth due to the easy comparable figures from 2020 when activity was depressed due to lockdowns. Sales grew 17% organically to EUR 17.40 billion, returning to precoronavirus levels in 2019 and mainly driven by the construction business. Management raised its previous guidance and guided for revenue and operating profit to be close to 2019 levels during this fiscal year, a milestone that was originally expected for 2022. We maintain our EUR 39 fair value estimate.

After refreshing our thesis, we rate all the three French telecom companies, Orange, Iliad, and Bouygues, as no-moat companies with stable moat trend ratings. We downgrade Orange’s moat rating to none from narrow as we believe an advantaged position in France is not enough to generate a moat for the overall company, as we see the rest of its businesses as not competitively advantaged with Spain being value-destructive. For Iliad and Bouygues the no-moat ratings are mainly based on a weaker fixed-line asset base position in France compared with Orange. As a general framework, we believe European telecom moats mainly come from efficient scale, which tends to be stronger in fixed networks than mobile ones, as the former are usually more complicated and costly to replicate. The number of players in each market and the regulatory framework are also important, as they can reinforce or weaken the efficient scale argument. Our fair value estimates are EUR 13.90, EUR 165, and EUR 39 for Orange, Iliad, and Bouygues, offering 30%, 22%, and 17% upside, respectively.

Bouygues is a conglomerate with a disparate number of businesses. In its construction segment Bouygues develops big infrastructure projects such as motorways, rails, power plants, and tunnels among others. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable so when difficult times come it can adjust its cost base rapidly (though this also prevents it from benefitting from operating leverage in times of high demand). Both Bouygues Construction and Inmobilier (residential construction) have high exposure to France, as a significant portion of their business comes from there.

No-moat Bouygues' first-quarter results for 2021 were slightly ahead of company-provided consensus, with sales of EUR 7.74 billion and operating profit of negative EUR 77 million, 2% and 45% higher than expectations respectively. Sales were up 7% organically, driven by all segments and favored by less coronavirus restrictions in France and internationally. We maintain our fair value estimate.