Intermoney | Ferrovial (FER) (Hold, Target Price 24 euros/share) and Acciona (ANA) (Buy, Target Price 200 euros/share) have won a contract to build part of the AVE between Lorca (Murcia) and Pulpí (Almeria). The project will require an investment of 171 million euros, according to the Expansión newspaper.
The work will consist in completing the 31 kilometres double track platform, as well as a tunnel, ten viaducts and 28 structures of different types. The execution time is 34 months. The works also take into account the remodelling of the stations at Puerto Lumbreras and Pulpí itself. These activities are included in the Murcia-Almería line as well as, at the same time, in the Mediterranean Corridor.
Valuation:
Good news for both companies, which to some extent are seeing their exposure to Spain strengthened. It is a small market given their exposure to overseas markets, having reaching record highs in their portfolios after the pandemic. The construction business as such generates a relatively smaller percentage of EBITDA, less than 20% of the total in a typical year, without Covid. Strategically, however, it is important because it allows for a reduction in the risks related to the execution of the concessions where the two firms participate. In its recently released 2021 results, Acciona showed a strong recovery in construction margins, much higher than expected. Meanwhile Ferrovial saw margins decline to zero in its subsidiary Ferrovial Construcción, the former Agromán. That said, this was offset by good results at Budimex (Poland) and Webber (US).
