Enersense

Enersense's execution of its new strategy appears to be successful. The company's divestment of its wind power portfolio will improve its equity ratio by 10pp for Q1 2025, on our estimates. Moreover, the Marine and Offshore Unit is now profitable and no longer a burden. In our view, the company's new efficiency programme could boost EBITDA by EUR 5m in 2026E, and the terms of the new financing facility might be disclosed before the end of Q1 2025. A strategy update, focused on Enersense becoming a pure service company, may then be announced in Q2 2025, we believe. In this context, we maintain our fair value range of EUR 4-5, based on our DCF analysis and backed by our peer group comparison. Marketing material commissioned by Enersense.

Net sales without extraordinary item was close to market consensus (LSEG) expectations in Q4. Moreover, EBITDA without one-offs was close to our expectation in Q4. EV charging business is discontinued leading to EUR 2-3m write-down in Q1. The Marine and Offshore Unit is now profitable and could be divested in H1 2025 we believe. The order backlog stood at EUR 393m (457m) end fo December. Cash flow from operating activities was EUR 17.5m (4.4m) in Q4. Dividend proposal was zero as expected. The company should meet its covenants at the end of March. An efficiency program of EUR 5m has been started. A strategy update as a pure service company could be released in Q2 2025 we believe. Overall, execution of the transformation program is progressing well. Clean core EBITDA guidance for 2025 is about the same as in last year (EUR 19.9m) and close to our expectations.

Net sales were EUR ~104m and EBITDA came in at EUR ~2m in Q4 2024, according to preliminary information. The wind power portfolio has already been sold, but near-term newsflow could be related to the divestment of the EV charger and offshore platform operations. Our EBITDA estimates for this year are highly sensitive to the divestment of these non-core operations. Enersense should meet its covenant terms at the end of March, but possible writedowns or losses from non-core operations could change the situation later in 2025. We trim our fair value range to EUR 4-5 (4.3-5.4) per share, which is based on a DCF model and backed by a peer group comparison. On our current estimates, Enersense's 2025E EV/EBIT is 6.5x. Marketing material commissioned by Enersense.

According to preliminary information, annual EBITDA will be EUR 4-6m in 2024 (old guidance EUR 4-8m, Nordea estimate EUR 7.9m). The adjusted EBITDA of the core businesses was EUR 19-21m (old guidance EUR 17-21m) in 2024. The company’s net sales could be EUR 413-416m in 2024 (Nordea estimate EUR 404m). Fortum will pay EUR 9m for Enersense’s wind power development portfolio in Q1 2025. The divestment of offshore platforms and EV chargers could happen in H1 2025 we believe. Net debt is declining but all risks related to the balance sheet have not yet faded away. Our EBITDA forecast for 2025 has been EUR 21m but a lot depends on losses coming from non-core operations, and when these operations will be divested. Overall, better visibility and predictability of cash flow, as well as lower interest expenses, are now needed after the hard years of 2022-24.

Enersense's wind power development portfolio has been divested, and losses from non-core operations are falling. Execution of the new strategy is progressing well. Yet net debt looks set to decline only by EUR 9m in Q1, which means risks related to the balance sheet are reduced but linger. The expected total divestment price of EUR 42m for its wind portfolio was a positive surprise. The divestment of offshore platforms and EV chargers could happen in H1 2025, after which the company might release new financial targets as a pure service company. We derive a lower fair value range of EUR 4.3-5.4 (4.5-5.6) per share, based on a DCF model and peer group comparison. Our net sales forecast for next year is EUR 399m, but that could change once the next two non-core operations are divested. Marketing material commissioned by Enersense.

The divestment price estimate of Enersense’s wind power portfolio (2.6GW) is in a wide range of EUR 9-83m depending of final investment decisions to wind power. Enersense estimates a probability-weighted divestment price of its portfolio to be EUR 42m. However, the company will receive only EUR 9m in Q1 2025 taking net debt down to EUR 34m from EUR 43m we calculate. The company will also book EUR 19m sales gain in Q1 which will increase the company’s equity ratio by 7pp to 25% we forecast. The expected total divestment price was a positive surprise and above EUR 19m paid by Enersense in 2021. However, the possible divestment of offshore platforms and EV chargers could happen at a relatively low price. Moreover, interest expenses are still relatively high and cash (EUR 9m) from wind power portfolio could have been higher. On a positive side, losses from non-core projects have clearly declined. Overall, a strategy change will bring Enersense back to its roots as a service provider. We expect Enersense to release new financial targets soon after all three divestments have been made.

Enersense has extended its telecom network service contract, including construction services, with Telia Finland. Renewed 3-year contract will add EUR 70m to the company’s order book in Q4 2024. Without possible divestments, this contract with Telia Finland represents some 6% of annual revenues we calculate. Risks related to declining order book are decreasing but the order book could still be down in Q4 y/y. Overall, the company's focus on profitability, cash flow and safeguarding its core service operations has started well. The company even upgraded its 2024 net sales guidance midpoint by 5% on December 4. Enersense renewed its strategy in June and could also divest its three business areas, but there are no new information regarding possible divestments. We believe a divestment of the wind power development portfolio could still happen in near future.

The company upgraded its 2024 net sales guidance midpoint by 5% on December 4. Full year EBITDA guidance remained unchanged. New revenue guidance is EUR 385-410m compared to Nordea’s estimate of EUR 404m. Our net sales forecast is now 2% above guidance midpoint (previously 7% above). Reported EBITDA 2024 is guided to EUR 4-8m (Nordea estimate EUR 8m). Enersense renewed its strategy in June and could divest its three growth engines, which are EV chargers, offshore platforms and onshore development portfolio. The equity story is now more related to upcoming divestment prices, as well as the sustainable growth and profitability of the service operations in the long term, rather than for revenue growth in 2024. Adjusted EBITDA in the continuing core businesses is guided to be EUR 17-21m in 2024.

The company's focus on profitability, cash flow and safeguarding its core service operations has started well. Q3 net sales and clean EBITDA were remarkably higher than LSEG Data & Analytics consensus expected. Losses from growth projects have declined, leading the EBITDA margin to be 7.7% in Q3. Restructuring has not affected its sales initiatives nor its capability to win new projects. We upgrade our 2024 estimates, but net sales and relative profitability for 2025 are highly dependent on possible divestments. We keep our fair value range of EUR 4.5-5.6 per share, which is based on a DCF model and backed by a peer group comparison. Based on our current estimates, Enersense's EV/EBIT 2025E is 6.7x. Marketing material commissioned by Enersense.

Net sales of EUR 112m was well above our expectation (EUR 91m) in Q3. The company’s EBITDA margin was 7.7% compared to our expectation of 5.3% in Q3. Losses related to offshore operations have declined and project deliveries have been successful. Moreover, tight efficiency programme has supported profitability. The full year 2024 guidance is unchanged. Order book was down by 31% in Q3 on y/y basis but the company has also won new bigger contracts during Q4 2024. Revenue is expected to be EUR 365-390m (Nordea EUR 382m) and reported EBITDA EUR 4-8m (Nordea EUR 4m). Clean EBITDA guidance for core operations is EUR 17-21m in 2024. Successful divestments of non-core assets would alter the balance sheet a lot and we expect to hear some news before end of the year 2024. A possible divestment of wind power development portfolio of 5GW could even lead to a positive surprise we believe. The company could set new long term financial targets for growth and profitability when there is more information regarding the restructuring process. Focus has reverted to project and service operations and the share has decent upside potential if the restructuring programme and strategy execution are successful. If net sales were EUR 300m, with an EBIT margin of 3.5%, zero debt and zero interest expenses, EPS could be EUR 0.51 we calculate.