Bouygues: Capitalizing on Energy and Construction Resilience Amid Real Estate Volatility

The construction and energy sectors are at the heart of global decarbonization and infrastructure investment, and Bouygues SA (ENXTPA: BOUY) is positioning itself to capture this secular opportunity. Despite facing headwinds in its real estate segment, the French conglomerate’s Q1 2025 results highlight a compelling story of operational resilience and strategic focus. With its Equans division leading the charge in energy transition and construction backlogs hitting record highs, Bouygues is primed to deliver growth even as its real estate challenges prove temporary. Here’s why investors should act now.

Equans: The Growth Engine of Decarbonization

Bouygues’ Equans division—its energy services and facilities management arm—is a standout performer. Q1 sales of €4.6 billion were flat year-on-year, but COPA (Current Operating Profit from Activities) surged 30% to €177 million, with margins improving to 3.8% amid its "Perform plan" execution. The division’s backlog of €26.4 billion includes high-margin contracts in rail, renewable energy, and smart infrastructure, underpinning its goal to hit 4% margins in 2025 and 5% by 2027.

Equans’ focus on grid modernization, energy efficiency, and industrial maintenance aligns perfectly with global trends. Governments and corporations are pouring capital into decarbonization, and Equans’ ability to deliver projects like Morocco’s €250M rail line and the UK’s €380M rail maintenance contracts underscores its competitive edge. With its backlog up 1% year-on-year and order intake strong, Equans is the clear growth driver for Bouygues.

Construction: Backlog Strength Signals Future Profitability

Bouygues’ construction businesses—Colas (roads/rail), Bouygues Construction (civil works/building), and others—reported a record €34.2 billion backlog at March 2025, up 12% year-on-year. This is a critical indicator of future revenue, as construction projects often span years.

• Colas: Backlog up 9% to €15.1 billion, fueled by rail investments in Europe and emerging markets. Its Q1 loss narrowed slightly, but the division’s full-year performance will benefit from its large order book.
• Bouygues Construction: Backlog surged 17% to €18.3 billion, with margins improving to 2.9%. Wins like a €100M French hospital and a €140M UK academic campus highlight its ability to secure high-margin projects.

The construction division’s COPA improved by €24 million year-on-year, despite seasonal Q1 softness. With infrastructure spending accelerating in Europe and beyond—think the EU’s €1.8 trillion Recovery and Resilience Facility—Bouygues’ construction arm is well-positioned to capitalize.

Real Estate: A Cyclical Hurdle, Not a Structural Issue

Bouygues Immobilier, the group’s real estate division, faces challenges in commercial property, with sales down 11% year-on-year. However, residential sales rose 12%, and the division’s COPA improved by €19 million to -€7 million. The stagnation in commercial real estate is cyclical, tied to post-pandemic office demand and economic uncertainty.

The broader group’s net loss of €156 million was inflated by a €40 million French corporate tax surcharge. Excluding this and other one-time items, the loss narrowed by €23 million year-on-year. The real estate headwinds are manageable, especially as Equans and construction offset them.

Financial Health: Strong Balance Sheet, Strategic Acquisitions

Bouygues’ liquidity remains robust at €14.8 billion, with net debt down 8.6% year-on-year to €7.1 billion. Its net gearing improved to 50%, a healthy level for a capital-intensive sector. The group’s acquisition of La Poste Telecom—a strategic move into telecom infrastructure—adds diversification and growth potential.

Valuation: Undervalued Amid Growth Catalysts

Bouygues trades at just 7.5x 2024 estimated EV/EBITDA, a discount to peers like Vinci (11x) and Sacyr (9x). This reflects investor skepticism around real estate and the French tax headwinds. However, with Equans’ margin expansion and construction backlogs at record highs, the stock offers upside of 20–30% if it can meet its 2025 COPA growth targets.

Risks and Mitigation

Geopolitical risks and energy cost pressures (e.g., Bouygues Telecom’s rising energy bills) are real, but the group’s diversification—spanning energy, construction, telecom—buffers against sector-specific shocks. The French tax hit is a known cost, and management has already factored it into guidance.

Conclusion: Buy Now for Secular Growth

Bouygues is a play on two unstoppable trends: decarbonization and infrastructure modernization. Its Equans division is a leader in energy transition, while its construction businesses benefit from record backlogs. Real estate’s soft patch is temporary, and the balance sheet is strong enough to weather it.

With shares down 12% year-to-date—despite Q1’s operational wins—now is the time to buy. The stock is undervalued, and the 2025 COPA guidance signals the turnaround is underway. Investors who act now can capture secular growth in energy transition and construction demand, with risks well-managed.

Action: Buy Bouygues SA (ENXTPA: BOUY) for long-term growth.