Construction Partners Inc (ROAD) PT Raised to $75 at DA Davidson

DA Davidson analyst Brent Thielman raised the price target on Construction Partners Inc (NASDAQ: ROAD) to $75.00 (from $55.00) while maintaining a Neutral rating.

The analyst comments "Extension of existing platform into growth territory; increased leverage likely limits deal activity for now. We are raising our PT to $75 (previously $55) or 15x/14x our F25/F26 EBITDA estimates and including pro forma costs for Lone Star. We consider these to be premium multiples relative to infrastructure services peer average/median multiples; although upward bias to margins with Lone Star, future opps. to expand/leverage a strong TX environment and ongoing organic growth opps. in core markets likely support valuation for now. We estimate net debt/F25 EBITDA of 3.1x with mgmt. focused on returning to 1.5x-2.5x over the next 4-6 quarters. Under this focus we presume essentially all FCF will be used to reduce debt in the next several quarters, likely limiting other deals. Lone Star looks to be a nice extension of the platform, although current valuation along with typical risks including larger deal integration into an inherently competitive TX market and elevated leverage ratios keep us sidelined."

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