ACS (1K) | Hold | Increasing debate on long-term growth

Research evidence excerpt

ACS (1K) | Hold | Increasing debate on long-term growth

therefore, what the right valuation multiple FCF 1,229 1,436 1,655

should be for these companies. EPS adj. and ful. dil. 4.24 5.02 5.66

Consensus EPS 4.1 4.7 5.5

Deconstructing the forecasts Net dividend 2.58 3.04 3.50

We are incorporating the buy-out of the Thiess minorities by Hochtief, closed on 1 FY to 31/12 (EUR) 12/26E 12/27E 12/28E

July: 40% stake purchase from Elliott (reaching 100% ownership) for a total P/E adj and ful. dil. 27.8 23.5 20.8

consideration of AUD1.18bn. This implies eliminating the corresponding P&L EV/EBITDA 9.3 8.5 7.8

minorities from that date onwards, as well as adjusting ACS and Hochtief's EV/EBIT 13.1 11.7 10.6

FCF yield 3.0% 3.7% 4.2% balance sheet lines accordingly. This explains the bulk of our moderate bottom- Dividend yield 2.2% 2.6% 3.0%

line upgrade over our 2026-2030 forecast period and takes our FY 2026 operational ND(F+IFRS16)/EBITDA 0.3 0.1 0.0

net profit forecast above company guidance for both companies. Gearing 3.6% -7.2% -16.6%

ROIC 39.8% 41.6% 43.4%

Excluding the impact (on minorities) of the Thiess transaction, we are revising our EV/IC 7.2 6.8 6.4

operational net profit upwards by an average of 2% over our forecast period. This

Sector Most Pref. Sector Least Pref. is explained by a more constructive stance on Turner (strong momentum at the CRH HOCHTIEF

beginning of the year continuing over the following quarters), and Dragados, Holcim

partly offset, at the group level, by higher financial expenses and taxes.

Valuation and investment conclusion

Our upgraded earnings forecasts and the roll forward of our valuation are much

more than offset by our higher WACC assumption for Turner (8.2% versus 7.7%),