Primoris SOTP Valuation Framework Shows Upside Even Assuming Further Renewables Issues; Upgrade to Overweight

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Primoris SOTP Valuation Framework Shows Upside Even Assuming Further Renewables Issues; Upgrade to Overweight

ificant discount to peers and the other parts of the business continuing to

perform well, we believe it is time for investors to take a step back and look at PRIM Quarterly Forecasts (FYE Dec)

through a SOTP perspective. With this note, we are updating our model for the new Adj. EBITDA ($ mn)

guidance and revising our valuation method to a SOTP approach. As shown below, 2025A 2026E 2027E

we see upside to valuation even if you assume additional cost overruns in the Q1 99 61A 96

Q2 155 (5) 136

renewables segment (which we view as unlikely but not impossible). We are Q3 169 89 191

upgrading the stock to Overweight from Neutral and raising our Dec-26 PT to Q4 108 131 151

$116. In the bullets below, we walk through our thoughts on each component of our FY 531 276 573

SOTP framework and show a sensitivity analysis that suggests the market is

Style Exposure

currently assigning approximately $500mm of negative value to the company’s

Renewables business. We think the stock's reaction has been overdone and that

patient investors will be rewarded over the next 12 months as the company puts its

execution issues in the rearview.

• Utilities segment continues to execute. Throughout our conference last week,

the management team expressed conviction that the utilities segment continues

to perform well and even suggested newer customer relationships forming for

project-based work that could be a tailwind to margins over time. With the

utilities segment largely dominated by MSA work, we view CTRI as an

appropriate (perhaps conservative) comp. We assign a multiple of 12.0x EV/

EBITDA to the utilities segment, but believe that it could demand a premium