Bullboard - Stock Discussion Forum Atkinsrealis Group Inc T.ATRL

Alternate Symbol(s): SNCAF

Industrials Conglomerates

Atkinsrealis Group Inc., formerly SNC-Lavalin Group Inc., is a professional services, and project management company. It delivers end-to-end services across the whole life cycle of an asset including consulting, and advisory and environmental services. Its segments include Engineering Services; Nuclear; O&M; Linxon; LSTK Projects, and Capital. The Engineering Services segment includes... see more

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Atkinsrealis Group Inc > One More (TD)

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Post by retiredcf on Jun 14, 2024 8:09am

One More (TD)

HIGHLIGHTS FROM ATKINSREALIS' INVESTOR DAY

THE TD COWEN INSIGHT

We are encouraged by the new three-year strategic plan unveiled by ATRL in connection with yesterday's Investor Day, and we came away from the event with an incrementally positive view of the company and its prospects. We continue to be bullish on ATRL's outlook and view the stock's valuation as attractive.

Event

Yesterday, ATRL held an Investor Day. The event featured presentations by ATRL's CEO, CFO, and various other members of the senior leadership team.

Impact: POSITIVE

We characterize the overall impact of the event as positive. On the whole, we were encouraged by the tone of the Investor Day, and we found management's commentary and newly issued multi-year targets to be supportive of our constructive stance on ATRL.

ATRL unveiled a new three-year strategic plan (called "Delivering Excellence, Driving Growth"), which outlines how and where ATRL intends to drive profitable growth through 2027. At a high level, ATRL's 2025–2027 plan represents a continuation and natural evolution of its previously communicated strategy, in our view. As expected, the strategy is focused on margin expansion and continuing to realize strong growth.

ATRL unveiled several targets pertaining to the 2025-2027 period, including:
An Engineering Services Regions segment organic revenue CAGR of >8%. Meanwhile, ATRL targets an Engineering Services adjusted EBITDA to segment net revenue ratio of 17% to 18% by 2027. We see these as healthy target ranges.

Nuclear segment revenue of $1.8bln–$2.0bln by 2027 (vs. TD's forecast of $1.2bln in 2024). This implies a three-year revenue CAGR of 14% to 17%, which we see as impressive. Meanwhile, ATRL targets a Nuclear segment adjusted EBIT to revenue ratio of 12% to 14% (vs. the 13% to 15% range it has historically targeted). Management noted that this expected moderation in Nuclear's margins reflects a forecast revenue mix shift, and not a change in competitive dynamics.

FCF to adjusted net income ratio of 80%–90% (in line with prior guidance).
ATRL also indicated that it intends to sell its 6.76% equity stake in Highway 407 by the end of 2027 (carried at a net value of $1.5bln in our ATRL target valuation). Our 2024 forecast is unchanged, while our 2025 estimates have increased slightly.

Our target price increases to $73.00 (from $68.00), reflecting our slightly higher 2025 forecast and a modest increase in our blended PS&PM target multiple (12.3x 2025E adj. EBITDA; up from 11.4x).