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Atkinsrealis Group Inc T.ATRL

Alternate Symbol(s):  SNCAF

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 consultancy, engineering, design and project management services. The Nuclear segment supports clients across the entire nuclear lifecycle with the full spectrum of services from consultancy, EPCM services, field services, technology services, spare parts, reactor support and decommissioning and waste management. The O&M segment consists of providing operations, maintenance, and asset management solutions. The Linxon segment offers engineering, procurement, management, and construction services. The LSTK Projects is comprised of the remaining LSTK construction contracts of the Company.


TSX:ATRL - Post by User

Post by Gabrielon Sep 13, 2024 12:37am
205 Views
Post# 36221696

Recommendations from NBF

Recommendations from NBFBottom Line - We now see ATRL as providing the best risk / reward skew in our consulting coverage. The potential earnings revision dynamic available from future margin expansion (function of robust demand for Engineering services and cost management) is enticing when combined with the undemanding valuation context – more specifically, 40% discount vs. peers (Figure 1) on 2025E estimates. Nuclear also makes Atkins unique with a material runway in this space (and very high barriers to entry). With FCF potential of $450 million to $500 million, at a 3.5% yield, this points to a market capitalization of around $13.5 billion, translating to a share price of $70 to $75 by 2027 (+57% vs. current market price). We understand investors are waiting to see actual margin improvement (especially in Canada) before stepping in, but in our view, the outlook is becoming more predictable, akin to STN in 2017 when the latter exited the construction business. So, why has the stock compressed over the last several weeks? The same nuclear thematic that drove up the sentiment cooled down recently when judging by the share price performance of Cameco while Q2/24 performance, objectively, was in line on heightened expectations post the Investor Day. While we do not expect ATRL share price trajectory to be linear, we believe investors should use the current downdraft as an opportunity to buy more as execution has been improving while any capital deployment risk is a 2026 event (as it takes time to monetize 407 / source & negotiate any potential deal). The overall thematic around Nuclear, Global Infrastructure and Electrification are only supportive from a positioning perspective. We reiterate our Outperform rating and target price of $68.00 per share derived using a SOTP valuation where we assign 13.0x / 12.0x / 4.0x EV/EBITDA multiples for Engineering Services Regions / Nuclear / Linxon / on blended 2024E/2025E forecasts while ascribing no value to legacy LSTK EBITDA drag, plus $12.99 per share from 407 ($10.42) and other concessions ($2.57).
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