Severfield - Revenue visibility and growth underappreciated

The quality of Severfield’s revenues is materially underappreciated by the market in our view, especially now that the UK and EU are embarking on huge investment programmes to renew and upgrade infrastructure to address global trends, such as the drive for net zero emissions. The reorganisation of the group, the internal improvement project (Project Horizon) and the EPS-enhancing M&A deal are not fully reflected in the FY24e P/E rating of c 7.0x, which is comfortably below the long-term average of 10.0x. Our positive stance is supported by the company’s strong balance sheet, progressive dividend and yield of over 5%.