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Rating action

Scope Ratings GmbH (Scope) has today affirmed the B+/Stable issuer rating on Hungarian construction company ENSI Kft. Scope has also affirmed the B+ senior unsecured debt rating.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

The affirmation of the issuer rating at B+/Stable reflects ENSI’s stable operating profitability and moderate leverage, supported by strong liquidity and a structurally positive net interest position. EBITDA margin* has remained resilient at around 7.6% in 2024 and is forecast to reach close to 8.5% in 2025, despite a more challenging market environment.

The issuer’s business model continues to show resilience, benefiting from: i) a strong market position in its niche segment of mechanical engineering; ii) an extensive list of references and expertise in large-scale projects; iii) long-term strategic partnerships with key general contractors, notably Market Építő Zrt (BB-/Stable).

This resilience is visible in the current order book (around HUF 23bn as of November 2025), which, while below the historical average of HUF 30bn, still provides some visibility. However, Scope highlights the inherent risks related to ENSI’s concentrated geographical scope (Hungary only), limited diversification, and high customer concentration (Top 5 clients account for 79% of revenues). A further deterioration in the business environment, such as weaker order intake due to sluggish domestic demand or the loss of a key client, could lead to a rapid weakening of credit metrics and pressure on the rating.

Business risk profile: B (unchanged). The business risk profile is supported by operating profitability and ENSI’s leading market position in a niche segment of the construction industry, while being constrained by the limited absolute size and weak diversification.

ENSI remains a small player in the context of both the Hungarian and European construction sectors. Despite its size, the company has demonstrated resilience and adaptability, successfully participating in large-scale projects linked to foreign direct investments (FDI), such as the BMW factory in Debrecen and battery manufacturing plants (Samsung SDI, SK, CATL). This contributed to significant revenue growth in 2023 (+84% YoY), followed by a slight decline in 2024 (-5.3% YoY), with revenues reaching HUF 32bn (EUR 80.1m).

The issuer operates exclusively in Hungary, which limits geographical diversification. Within Hungary, the project mix has shifted further toward the countryside (76% of projects), driven by major automotive and industrial investments, while Budapest accounts for 24%. Segment diversification remains weak, as ENSI is active only in the buildings segment; however, exposure to various subsegments (manufacturing plants, offices, residential) provides some risk mitigation. Customer concentration remains high, with Market Építő Zrt. accounting for around 45% of revenues in 2024 (Top 5: 79%). The current order book for 2025-26 stands at HUF 23bn (0.75x), below the historical average of HUF 30bn, indicating potential topline pressure in 2026. Medium-term visibility remains limited due to the short duration of projects (typically less than 12 months).

Profitability has remained robust despite adverse market conditions, with EBITDA margins at 7.6% in 2024 and forecasted at 8.5% for 2025. Going forward, margins are expected to stabilise around 7%, supported by ENSI’s strong niche positioning, although softening demand and macroeconomic headwinds pose risks. Scope highlights the limited medium-term visibility on cash generation, as the order book usually entails only the next year (project duration usually less than 12 months).

Financial risk profile: BBB+ (unchanged). ENSI’s financial risk profile remains the strongest pillar of the rating, supported by moderate leverage and a structurally positive net interest position, despite temporary weakness in cash flow generation.

Following the HUF 5.5bn senior unsecured bond issuance in 2022 under the MNB Bond Funding for Growth Scheme, leverage increased from historically debt-free levels to a moderate range. Scope expects debt/EBITDA to remain between 2.0x–3.5x over the forecast horizon, with no additional debt intake assumed. As bond amortization does not start until 2027, the evolution of leverage will depend primarily on operating profitability. The volatility in FFO/debt between 2022 and 2024, ranging from 14% to 101% and then dropping to -7%, reflects significant swings in operating cash flow generation relative to debt. These fluctuations are primarily driven by accrued and deferred income positions, which impact funds from operations. Despite this variability, the projected FFO/debt for the next three years (on average 36%) indicates a normalization trend, albeit still subject to business cyclicality. While historical volatility is notable, the expected stabilization supports our view that overall leverage remains manageable, given the company’s capacity to maintain adequate liquidity and debt serviceability going forward.

Interest coverage continues to benefit from net interest income, as unused bond proceeds are placed in short-term deposits (yielding around 4% in 2025–2027), offsetting the fixed coupon of 4.75%. This results in net interest income in the medium term, albeit at a lower level compared to 2023–2024. While interest cover is structurally strong, Scope applies a conservative view given potential risks from faster-than-expected M&A or additional debt intake. Nevertheless, ENSI is expected to comfortably meet its interest obligations over the medium term. The bond proceeds have not yet been deployed and the expected acquisitions have not yet taken place, which limits execution risk for now but underscores the importance of maintaining liquidity until strategic plans materialize.

Cash flow coverage, historically strong, weakened in 2024 with negative free operating cash flow, driven by higher working capital requirements linked to large-scale projects. Cash flow coverage has exhibited significant volatility, swinging from 22% to 73% and then sharply negative at -37% during 2022-2024. This pattern underscores the sensitivity of free operating cash flow to deferred and accrued revenues, as well as volatile working capital changes. The projected improvement to 56% on average over the next three years suggests a return to strong coverage levels. Despite historical swings, the forward-looking profile indicates the company’s ability to generate robust free cash flow under normalized conditions, providing a solid buffer for debt repayment.

Liquidity: adequate (unchanged). Liquidity remains adequate, supported by the absence of short-term debt and a strong cash position. ENSI had HUF 6.8bn of unrestricted cash (including bond proceeds HUF 5.5bn) at YE 2024 and expects positive FOCF of HUF 3.5bn in 2025. No debt maturities occur before 2027, and liquidity risk is considered remote given the significant cash buffer.

Supplementary rating drivers: -1 notch (unchanged). The B+ issuer rating incorporates a negative one-notch adjustment for peer context. The issuer’s limited size and weak diversification in terms of activity, geographical outreach and customer portfolio constrains its credit profile to the B rating category compared to relevant peers in the BB category.

Outlook and rating sensitivities

The Outlook is Stable. This incorporates Scope’s assumption that ENSI’s credit metrics will remain mainly unaffected by the worsening performance of the construction segment, staying at their current level, with debt/EBITDA consistently below 4.0x, positive net interest, and a volatile FOCF. The outlook factors in Scope's expectations of potential M&A in the range of HUF 5bn over the forecast horizon.

The upside scenarios for the ratings and Outlook are (individually):

1. Improving business risk profile, via an improved market position, diversification of stronger visibility on cash flows from a more substantial order backlog, paired with maintained credit metrics
    
2. Removal of the negative rating adjustment for peer group wile at least maintaining its current financial risk profile

The downside scenario for the ratings and Outlook is:

1. Debt/EBITDA sustained above 4.0x

Debt ratings

ENSI issued a HUF 5.5bn senior unsecured bond (ISIN: HU0000361258) in January 2022 through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds are currently unused but earmarked for M&A, in line with the company’s strategy to enter related segments and achieve synergies and economies of scale. The bond has a tenor of 10 years and a fixed coupon of 4.75%. Bond repayment is in six tranches; 10% of the face value is payable each year between 2027 and 2031, and 50% at maturity in 2032. Scope highlights that ENSI’s senior unsecured bonds issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 5.5bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 30 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is zero notches. Given the limited rating headroom, the company must at least maintain its current credit profile to avoid triggering the rating-related covenant.

Scope has affirmed ENSI’s senior unsecured debt rating at B+, the same level as the issuer rating. The recovery analysis is based on a hypothetical default scenario at year-end 2027. Scope used the going concern scenario in its analysis due to the asset-light nature of the company and the assumption that its business activity generates its enterprise value. Recovery is ‘average’ for the holders of senior unsecured debt in this scenario.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

ENSI Kft.

Issuer rating: B+/Stable, affirmation

Senior unsecured debt rating: B+, affirmation

*All credit metrics refer to Scope-adjusted figures

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Construction and Construction Materials Rating Methodology, 24 January 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Vishal Joshi, Analyst
Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 17 January 2022. The Credit Ratings/Outlook were last updated on 11 December 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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