Constr., Infra & Materials (360) | Kicking the can on recovery

研报英文原文证据摘录

Constr., Infra & Materials (360) | Kicking the can on recovery

Constr., Infra & Materials

A more cautious earnings outlook appears sensible

In addition to the ongoing challenges posed by both supply and demand constraints,

the conflict in Iran has put further pressure on the housebuilding sector by pushing

mortgage rates higher, further weighing on demand, and reigniting build-cost inflation

concerns, thereby dampening profitability.

While housebuilders can partially pass on rising costs to buyers, their ability to protect

margins ultimately depends on broader market conditions. In the current weak

demand environment, pricing power remains limited. Although we expect some

improvement in both the level of completions and selling prices, we do not believe this

will be sufficient to offset either the post-Covid inflationary reset or the renewed cost

pressures seen this year. As a result, we do not expect the sector to fully return to pre-

pandemic profitability levels over the remainder of the decade.

Against this more challenging backdrop, management teams have broadly reassessed

their capital allocation priorities and reduced planned land investment in order to

support cash generation and protect balance sheets. Overall, the sector equity story

has shifted from a pure volume and margin recovery towards cash preservation.

The volume and margin recovery story is now facing new headwinds

The UK housing market has remained subdued, reflecting weakness on both the supply and

demand sides. Recent geopolitical tensions have put further pressure on affordability, as

mortgage rates have rebounded and expectations for rate cuts have been pushed out.

Nevertheless, we continue to expect conditions to improve over the remainder of the