Vinci: Double-Digit Concessions Growth Supports Higher Free Cash Flow Guidance

Narrow-moat Vinci DG grew revenue by 9% during the third quarter, supported by the ongoing recovery in passenger numbers across its airports. The defensiveness of its Concessions business, which tends to be resilient to macroeconomic conditions, was supported by impressive organic sales growth at its Energies and Cobra IS segments—10.6% and 13.5%, respectively. Management raised its outlook for its Autoroutes business and expects airport passenger numbers in the fourth quarter to be similar to prepandemic levels, which coincides with its upgraded free cash flow guidance of at least EUR 4.5 billion from between EUR 4.0 and EUR 4.5 billion. Shares are trading marginally higher but remain undervalued to our EUR 122 fair value estimate, which we maintain.

Passenger numbers across its network of 71 airports grew 21% year over year and are only slightly below the same period during 2019, which supported 38% revenue growth for the airport segment during the third quarter. Its Autoroutes business grew 5%, benefiting from a combination of higher traffic on its toll roads and tariff increases. We believe investor concerns of its cyclical Contracting segment are overstated, reflected by the group’s impressive 10% order book growth to a record EUR 63.3 billion, driven by several contract wins related to energy transition. Its order book provides 14 months of visibility and allows Vinci to be selective in bidding for new contracts, which we expect will help protect its profitability should economic conditions deteriorate.