Strong underlying markets in Sweden and Norway. The markets for railway expansion and maintenance in Sweden and Norway are estimated by NRC to be valued at around 18 000 MNOK each and are estimated to grow by 9 % CAGR during the coming years.

NRC Group enters the Finnish market by acquiring VR Track. After the purchase of VR Track, NRC Group will also be active on the Finnish market, which is estimated to grow by 8 % CAGR until 2022. This acquisition is also expected to increase NRC’s capacity to take on larger projects, which will be important for future growth.

Fragmented market gives NRC growth potential. The railway construction and maintenence market consists to a large extent of many smaller and often very specialized companies. This allows NRC to act as a consolidator and also means that NRC is one of few companies that can handle complex projects.

NRC is exposed to political and operational risks. As the company depends on budgets set by politicians there is always a risk that these budgets are lowered. Another risk for the company is that NRC, just as all companies within the construction sector, are exposed to risks related to unexpected costs on individual projects.

A relative valutation indicates an upside of 51 % for a base case until 2020. Revenues is estimated to grow by a CAGR of 40,5 % from 2017 until 2020, including all acquisitions, while maintaining an EBITDA-margin of around 8,5 %, resulting in an EBITDA of 688 MNOK 2020. Given a target multiple of 12x EV/EBITDA based on a peer group, a potential upside of 51 % is motivated.


Analysts: Andreas Magnusson and Johan Sterner