TGCC: M.S.IN recommends to "strengthen" the stock in portfolios

After several difficult years for the construction sector, impacted by the health crisis, rising costs, and geopolitical tensions, the outlook is improving. Analysts from M.S.IN indicate that the positive momentum observed in 2024 is expected to continue into 2025, supported by a significant rebound in public investment. In this favorable context, TGCC has delivered outstanding performance, boasting a record order book of nearly 19 billion dirhams, a 122% increase year-on-year. This historic level reflects the strength of activity, particularly in major infrastructure projects launched in anticipation of the 2025 Africa Cup of Nations and the 2030 World Cup, which Morocco will co-host. TGCC is fully benefiting from the revival of public investment, with the budget reaching 380 billion dirhams in the 2026 Finance Bill, an increase of 11.8%. The group is involved in large-scale projects covering renewable energy, railway infrastructure, hydraulic works, and waste management. Currently, 71% of the order book consists of public and semi-public contracts, ensuring good visibility for future activities. The group is also expanding internationally, with active subsidiaries in Africa and the development of new markets in Saudi Arabia. From a financial perspective, TGCC presents a healthy situation. By the end of 2024, working capital stood at 1.84 billion dirhams, against a positive working capital requirement of 1.82 billion, resulting in a net cash surplus of 14 million dirhams. The debt ratio has significantly improved, decreasing from 67.5% in 2023 to 38.1% in 2024, due to reduced debt and increased equity. The debt, which had reached 3 billion dirhams in June 2025 following the acquisition of STAM VIAS, has been fully repaid thanks to a capital increase of 2.2 billion dirhams completed in August 2025. In the first half of 2025, the group generated revenue of 5.6 billion dirhams, a 43.6% increase. Operating profit surged by 139% to 978 million dirhams, while the net profit attributable to the group rose by 60.6% to reach 416 million dirhams. These results are supported by the growth of the infrastructure segments (45% of the order book), dams (23%), and real estate (11%), as well as the successful integration of STAM VIAS, which strengthens the group's position in roadworks. Between 2021 and 2024, TGCC paid an ordinary dividend ranging from 5.5 to 11.5 dirhams per share, resulting in an average payout ratio of 71.6% and an average yield of 3.5%. M.S.IN analysts anticipate the continuation of a generous policy, with an estimated average dividend of 27.2 dirhams per share for 2025-2029, corresponding to an average annual growth of 16% and a payout ratio of 70.9%. Based on a discounted cash flow (DCF) valuation, M.S.IN projects an average annual revenue growth rate of 9.9%, a WACC of 7.6%, and a gearing of 38.1%. The intrinsic value of TGCC shares is estimated at 1,020 dirhams, indicating a 12% discount compared to the current price. Therefore, M.S.IN recommends strengthening TGCC stock in investment portfolios.