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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BB-/Stable issuer rating of Market Építő Zrt. (Market). The senior unsecured debt rating has been affirmed at BB-.

The rating affirmation reflects credit metrics that have remained within Scope’s rating guidelines. This is largely due to resilient operating performance underpinned by a relatively robust but concentrated order backlog. The affirmation also reflects robust financial metrics despite the anticipation of new, debt-financed real estate developments.

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

Key rating drivers

Business risk profile: B+ (unchanged). Market’s business risk profile remains underpinned by its leading position in the Hungarian construction sector. However, the company’s size is still small compared to European peers. Weak geographic diversification remains a constraint. Market’s activities are concentrated in its domestic market, in the Budapest region and across Hungary, where it derives a large share of its revenues from a sizeable pool of large projects.

Similar to 2023, 2024 saw increased uncertainty in Hungary’s construction sector amid a persistently small pool of public construction projects. As a result, the overall backlog and volume of construction production decreased year-on-year in 2024. Heightened competition for private sector projects and pressure on the margins of companies in the sector continued. Despite unsupportive construction market conditions in Hungary, Market benefits from its scale and has continued to source new projects, while at a declining volume (book-to-bill ratio of 0.8x in 2024), as various projects are often too large for other market players.

Market’s project backlog totalled HUF 648bn as of June 2025 (HUF 590bn in June 2024). This is equivalent to 2x its three-year average revenue until 2024 and provides top line visibility for the next two years. The company’s backlog remains concentrated in terms of number of projects and across business segments, with a clear bias towards building projects. Market’s three largest projects account for 44% of the order backlog, the largest being the Budapart project, valued at HUF 258bn.

In 2024, the company used the economic slowdown to focus on various consolidation and efficiency measures. As a result, the Scope-adjusted EBITDA margin* recovered to 9.7% in 2024 from 7.7% in 2023 driven by: i) cost optimisation efforts; ii) a focus on the efficiency of procurement activities; iii) prudent cost management; iv) data driven operations; and v) the introduction of a lean¹ approach. In addition, Market is continuing to explore alternative products and procurement sources in order to maintain and further improve its cost advantage and reduce the risk of supply chain disruptions.

Options to mitigate the negative impact from rising energy prices and labour costs are limited. In order to ensure an adequate supply of raw materials, Market has started a strategic cooperation to build a mineral rockwool insulation factory through a joint venture with Masterplast. Similar to the ramp-up of the PreBeton concrete factory, the new production facility will enable Market to source part of its raw materials internally and give it additional control over its supply chain. In addition, Market has demonstrated its commitment to innovation and ESG issues. It is the first company in Hungary’s construction sector to issue an ESG report and has reduced aggregated Scope 1 &2 CO2e emissions to 11,085 t in 2023 from 13,200 t in 2021 (ESG factor: credit-positive). As a result, Market is less exposed to potentially stricter regulation or reputational risks.

Market’s large backlog and position as one of the largest and most visible contractors in the Hungarian market afford it bargaining power with suppliers. Scope anticipates that the company’s EBITDA margin will stabilise at around 8% in the next few years. This is based on a more predictable cost environment and Market’s focus on larger projects so as to benefit from economies of scale and reduce the incidence of loss-making projects.

Financial risk profile: BBB (unchanged). The company’s financial risk profile is supported by low leverage and very strong EBITDA interest cover. However, credit metrics will come under pressure from the anticipated debt issuance to finance planned real estate developments, especially in 2026.

Market’s creditworthiness is supported by very low leverage with debt/EBITDA of 0.8x in 2024, driven by the profitability improvement as the EBITDA increased to HUF 30bn in 2024 from HUF 25bn in 2023. Scope anticipates that leverage will increase to above 2x in 2026. The rating agency’s view is based on Market’s intention to increase its bank debt by an additional HUF 18bn in 2026 to support investments in three luxury office and residential real estate projects (this is part of the company’s extended strategy, launched in 2020). The company’s strategy focuses on real estate projects in which Market is the main contractor, allowing it to maximise its operating capacity. Scope points out that delays or cost overruns in the development pipeline, as well as low pre-sale or pre-letting rates, could force the company to provide fresh funding for these investments or result in reputational damage.

EBITDA interest cover remains strong, with positive net interest income in 2024. This was supported by higher interest income and stable interest paid, as the HUF 42bn of bond debt has fixed interest rates of 2.7% and 2.95%. Scope expects higher financial expenses in the coming years amid Market’s partially debt-funded investment phase. Scope anticipates that EBITDA interest cover will drop to around 13x by the end of 2026.

Historically, free operating cash flow has been very volatile, driven by working capital swings and the gradual rise in capex. This volatility is likely to persist due to high capex in the 2025-2027 period (totalling about HUF 41bn) including the expansion of real estate investments. Although a large part of the capex plan is discretionary, some projects are ongoing and will weigh on free operating cash flow in 2025, turning it negative. Since Market remains opportunistic regarding real estate projects and could take on more projects in the near future, Scope believes that the company will use its available cash balance between 2025 and 2026.

Liquidity: adequate (unchanged). Liquidity is adequate. The HUF 2bn and HUF 2.8bn of short-term debt maturing in 2025 and 2026 respectively is fully covered by the unrestricted cash balance of HUF 50bn as at YE2024. Scope considers 40% of cash to be non-accessible. Moreover, Scope expects the HUF 43bn debt maturity in 2027 (primarily related to HUF 23.5bn from an outstanding bonds and HUF 18bn from real estate project loans) to be comfortably covered by available unrestricted cash and free operating cash flow generation. Scope also notes Market’s good relationship with financial institutions. The credit facilities are provided by five different banks, including large Hungarian banks such as MBH and OTP as well as international financial institutions including Raiffeisen Bank and Unicredit Group. In addition, the company has HUF 216bn of bank guarantee limits (HUF 102bn available at YE 2024), which can be used for future activities.

Scope highlights that Market’s senior unsecured bonds issued under the Hungarian National Bank’s Bond Funding for Growth Scheme have a covenant requiring the accelerated repayment of the outstanding nominal debt amount if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B-. If this does not happen the remaining outstanding amount must be split into equal amounts for the remaining duration and will be repaid at each coupon payment dates until maturity. Such a development could adversely affect the group’s liquidity profile. The rating headroom to entering the grace period is one notch. Scope therefore sees no significant risk of the rating-related covenant being triggered. In addition, if the rating deteriorates, then the group may not pay dividends or other pay-outs to shareholders, may not increase its debt amount.

Supplementary rating drivers: credit-neutral (unchanged). The rating does not incorporate any adjustments related to financial policy, peer group considerations, parent support or governance and structure.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Outlook is Stable and incorporates Scope’s expectation that Market’s leverage will remain below 3x. Scope expects the company to retain its strong liquidity position. The Outlook is based on total capex of around HUF 41bn over the 2025-27 period and EBITDA of above HUF 20bn per annum, supported by an EBITDA margin of around 8%.

The upside scenario for the ratings and Outlook is:

• Significant improvement in Market's business risk profile, e.g. improved segment or geographic diversification, while credit metrics remain in line with Scope's expectations (unlikely in the short to medium term)

The downside scenario for the ratings and Outlook is:

• Debt/EBITDA moving towards 4x, e.g. if investments under the business plan and in real estate projects weigh on leverage

Debt rating

Scope has affirmed Market’s senior unsecured debt rating at BB-. The rating is based on a going-concern scenario as of year-end 2026. The recovery rate is “above average” for senior unsecured debt. The rating is kept at the same level as the issuer rating, due to discretionary nature of the real estate projects, which can lead to introduction of the new secured debt, ultimately having a negative impact on the recovery expectations.

Environmental, social and governance (ESG) factors

The construction industry has a large impact on the environment. Environmental efforts are largely focused on reducing energy usage and associated emissions. Attempts are also being made to find innovative supply products and to internalise the production of materials to better manage supply chains and reduce the risk of disruptions. Market is the first construction company in Hungary to issue an ESG report, which demonstrates its commitment to ESG. Based on 2023 data, the company has managed to reduce aggregated Scope 1 &2 CO2e emissions to 11,085 t in 2023 from 13,200 t in 2021. As a result, Market is less exposed to potentially stricter regulation or reputational risks.

All rating actions and rated entities

Market Építő Zrt.

Issuer rating: BB-/Stable, affirmation

Senior unsecured debt rating: BB-, affirmation

1. Business strategy focused on streamlining processes, reducing delays and eliminating non-value-added activities.

*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 https://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 https://www.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 https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.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 https://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 Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation   YES
With access to internal documents                                       YES
With access to management                                                 YES
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: Kamila Bernadeta Hoppe, Senior Specialist
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 16 August 2019. The Credit Ratings/Outlook were last updated on 19 July 2024.

Potential conflicts
See www.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
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.