Sell off appears way over done

In their trading update yesterday, VP says that the domestic homebuilding and infrastructure markets were “supportive” in H1’22, with construction “stable”. Here the Group experienced “good” power transmission demand (re renewables & offshore wind) augmented by AMP7 water & civil engineering which both “picked up” in Q2.

We reiterate our FY’23 adjusted PBTA & EPS forecasts of £41.4m & 78.1p respectively on revenues up 4.2% to £365m, with net debt (pre IFRS 16) closing Mar’23 at £130m (ie flat YoY), equivalent to a comfortable 1.4x EBITDA.

This in turn puts Vp on attractive 4.5x EV/EBITDA and 9.2x PE multiples, whilst paying a 5.4% dividend yield and generating a 15% ROCE. Consequently, we think the stock is materially undervalued and instead estimate its worth (at least) £11.30/share – offering more than 50% potential upside from current levels.