Zengun Group AB (publ) Full Year Report January

Zengun reported FY2025 revenue of MSEK 2,407.3 (down from MSEK 2,584.5) with EBITDA essentially flat at MSEK 157.5 and EBITA of MSEK 151.2; earnings rose to MSEK 84.0 (70.3) and operating cash flow improved to MSEK 67.7. Q4 was notably strong with net turnover MSEK 744.7, EBITA MSEK 46.1 and a surge in orders received to MSEK 739.2 (Q4 2024: 275.6), leaving an order book of MSEK 2,947.9. Management highlights several high-profile Stockholm projects (Sergelskrapan, Karolinska L9, Riddarholmen Church, Centralbadet) and signals continued hiring and higher production rates in 2026, underpinning a cautiously positive outlook despite full-year top-line decline.

Analysis

Market structure: Zengun’s Q4 jump in orders (MSEK 739 vs 276) and an orderbook of MSEK 2,948 (~1.22x 2025 revenue) signals niche demand for complex commercial/heritage projects in Stockholm, benefiting specialist contractors, façade/restoration subcontractors and property owners (e.g., Fabege, Wallenstam). Volume residential players face relative headwinds as capital shifts to commercial refurbs; skilled-labor scarcity implies upward pressure on subcontract pricing and selective pricing power for experienced teams.

Risk assessment: Key tail risks are project execution (logistics-restricted sites like L9), concentrated geography (Stockholm) and working-capital stress as complex projects shift cash conversion cycles; operating cash flow volatility (Q4 OpCF MSEK 31.8 vs 57.9) is a warning. Immediate noise is limited (days), but 1–12 month risks include permit delays and margin squeeze from rising sub-contractor wages; monitor backlog conversion rate and OpCF % (warning if conversion <60% or OpCF/EBITDA <0.2).

Trade implications: Tactical approach — overweight Swedish commercial/property managers and specialist contractors; underweight pure-play residential builders. Use small-cap exposure to Zengun (if liquid) plus scalable exposure in SKA-B.ST, FABG-B.ST and PEAB-B.ST using equity and options to control downside. Time entries in next 2–6 weeks post any confirmatory tender wins; take profits on 15–25% moves or cut if order intake falls >20% YoY.

Contrarian angles: Consensus may underprice backlog convertibility — if Zengun converts >80% of backlog in 12 months margins can re-rate from ~6.5% EBITDA to 7.5%+, delivering 20–40% equity upside. Conversely, the market may underappreciate working-capital strain — rising project complexity can amplify capex/WC needs and force dilutive financing for small players; watch net debt/EBITDA moving above 2.5x as a sell signal.

Key Decisions for Investors

• Establish a tactical 2–3% long position in SKA-B.ST (Skanska) and a 2–3% long position in FABG-B.ST (Fabege) to capture Stockholm commercial/refurb demand; hold 6–12 months, trim 50% at +20% and stop-loss at -12%.
• Initiate a pair trade: long FABG-B.ST 2% / short JM.ST 2% (or PE residential index equivalent) to express rotation from residential to commercial; target 10–15% spread capture within 6–12 months, unwind if residential starts outperforming by >8% QoQ.
• Small speculative exposure to Zengun (ZENGUN.ST if listed) of 1–2% for asymmetric upside from backlog conversion; use a 25% stop-loss and target 30–50% upside within 12 months contingent on order-to-revenue conversion >70%.
• Buy 3–6 month call spreads on NCC-B.ST or PEAB-B.ST (bull-call with strike +8–12%, sell strike +20%) sized 1–2% notional to leverage upside while capping premium; exit on 50% of max theoretical gain or if sector order intake drops >15% sequentially.
• Risk-management triggers: reduce sector exposure by 50% if aggregated Stockholm contractor order intake over next quarter falls below MSEK 1.8bn or if operating cash flow/EBITDA for peers drops below 0.2, and avoid new long commitments if net debt/EBITDA >2.5x for any target name.