ACS Actividades de Construccion y Servicios: Higher Risk, Higher Reward

Research evidence excerpt

ACS Actividades de Construccion y Servicios: Higher Risk, Higher Reward

IdeaMExhibit 1: Very high revenue visibility into 2026/27e for DC construction (75-80%

revs covered), now extending into 2028-30e (55-70+% revs covered)

Source: company data, e = Morgan Stanley Research estimates

That solid visibility extends to the Engineering & Construction division (E&C -

Dragados + Hochtief Europe = MSe 13% of target equity value) with an excellent

book-to-bill and green shoots on margin expansion to close the gap with best-in-

class US Civil Construction peers.

Exhibit 2: ACS Engineering & Construction - Solid book-to-bill > 1.2x supporting

top-line growth coupled with margin expansion into 2026/27e

ACS Engineering & Construction - Book-to-bill proxy (EURm)

15,000

14,000

13,000

12,000

11,000

10,000

9,000

8,000

7,000

6,000

5,000

FY24 1Q25 2Q25 3Q25 4Q25 1Q26 … FY26e FY27e

12-mth order intake 12-mth revenues

ii) More flexibility to deploy capital in high-return areas (DC ownership +

engineering/modularisation our favourite avenues for inv'ts). We acknowledge the

lack of consistency on the capital allocation narrative, with reassuring comments on

balance sheet strength/funding access made by the CEO on 12 May on the 1Q26 conf

call followed a week later by a €1.8bn capital raising exercise.

That said, the add'l firepower seems targeted to areas where we believe ACS can

create most value: #1 The DC co-development JV with GIP (€4-7.5bn of NPV value

creation over 2026-28e already / ~22% equity IRR on investments), and: #2

Engineering/modularisation at Turner, leveraging its scale in Advanced Technologies

(DCs, biopharma) to industrialise the construction process, boost margins and

strengthen its operating moat = as such, it would solidity the 3x step-up in EBIT we