Vinci Earnings: Stronger-Than-Anticipated Recovery in Airport Passengers; Raising Our Fair Value 5%

Narrow-moat Vinci DG 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.

The number of airport passengers during first-half 2023 have exceeded 90% of 2019 levels, which keeps trending higher every quarter. Meanwhile, the segment’s EBIT margin of 43.8% during first-half 2023 now exceeds prepandemic levels. The auto routes business is still displaying stability. Its grew revenue by 5.5% on 2.2% higher traffic volumes despite being unable to fully raise toll-road tariffs, as per its concession agreement, due to opposition from the French government. Order book growth of 9% to a record EUR 61.5 billion provides 13 months of visibility, allowing the group to be more selective when taking on new projects. We believe this supported margin expansion across the energies, Cobra IS, and construction segments during the first half. The group’s order book excludes a sizable Grand Paris Express project won this month.

An interim dividend of EUR 1.05 was declared, a 5% increase year over year.