Enersense

With its updated core business strategy, Enersense is extending its focus from construction to maintenance and modernisation. Development and digitalisation of its project and service delivery model could also support profitability and offer a core competitive edge compared to its competitors. The updated strategy includes a revenue growth target of 4-5% on average in 2025-28. The new EBIT margin target of 5%-plus looks a little challenging but is in line with our expectations for the strategy update. Growth of higher-margin businesses could improve EBIT margin beyond 3% we believe. Our fair value range remains EUR 3.6-4.6, based on our DCF analysis and backed by a peer group comparison. Marketing material commissioned by Enersense.

Enersense released new financial targets as a pure service company on 4 June. The company will also arrange its CMD on 4 June to present its updated core business strategy for the new strategy period 2025-2028. The company’s strategic target is to be a trusted lifecycle partner for its customers operating in energy transmission and production, industrial energy transition and telecommunications. Main market areas are Finland and Baltics. Average annual revenue growth target is set to 4-5%. EBIT margin target is 5%-plus. Target for net gearing is below 100%. The balance sheet has strengthened and on 25 March 2025 a new financing arrangement was agreed upon. Enersense is also targeting an annual performance improvement (EBIT run-rate) of around EUR 5m from H2 2026 onwards. New revenue growth and EBIT margin targets were close to our expectations.

Enersense won a contract with Fingrid to build the 400/110 kV transformer substation and related power line. New substation will enable the future connection of wind farms in the area to the main grid. The project (EUR 15m) will employ Enersense until the end of 2027. The substation project represents 4% increase to the order book end of March. However, underlying markets were somewhat soft in Q1. The order backlog was EUR 373m at the end of March (EUR 444m a year ago). We have forecasted the Power segment net sales to be EUR 164m with clean EBITDA margin of 9% in 2025. The next big news could be related to the CMD and the company’s updated strategy and new financial targets as a service company on 4 June.

Net sales and adjusted EBITDA were below our expectations in Q1, but the company reiterated its clean EBITDA guidance of EUR ~20m for 2025. Enersense is confident about its sales pipeline and its value-uplift programme could become visible as early as H2 2025. The balance sheet has strengthened and on 25 March 2025 a new financing arrangement was agreed upon. We believe the company is in no rush to sell the Marine and Offshore unit, as the Finnish maritime industry could receive orders to build several icebreakers. Our new fair value range is EUR 3.6-4.6 (3.8-4.8), based on our DCF analysis and backed by a peer group comparison. The next big news could be related to the CMD and the company's updated strategy and new financial targets on 4 June. Marketing material commissioned by Enersense.

The company’s reported EBITDA was EUR 21m (Nordea est. EUR 21m) in Q1. Adjusted EBITDA was EUR 2m (Nordea est. EUR 5m) in Q1. The Industry and Connectivity segments had a lower margin than year ago in Q1. Net sales was EUR 70m (consensus est. EUR 84m, Nordea est. EUR 89m). The order backlog stood at EUR 373m (444m) end of March. The execution of the strategic alignment conducted in summer 2024 to focus on core service operations has progressed well. Equity ratio was 22% end of March (Q4 2024: 13%). Clean EBITDA in core operations in 2025 is guided same y/y (2024: EUR 19.9m, Nordea est. EUR 19.6m). An assessment of the Marine and Offshore Unit is still ongoing and it is no longer included in full-year guidance.

Enersense will release new financial targets on 4 June 2025 at its CMD event. The company finalised negotiations on a one-year financing package already at the end of March 2025, contrary to our comment on 17 April where we believed negotiations were still ongoing. Covenant for equity ratio is 16.5% end of June and 18% end of September. Interest bearing net debt per EBITDA covenant is 2.25x in 2025. As a change to the previous practice, convertible bonds are treated as debt in the equity ratio calculation. Company-specific risks have kept the valuation discount compared to the peer group relatively wide. But valuation difference to peers could tighten when earnings volatility will decline and risks related to financing are decreasing. The share has upside potential if the restructuring programme and strategic execution continue as planned.

Enersense could release new financial targets as a pure service company on 28 April. The company will also arrange its CMD on 4 June to present its updated core business strategy and financial targets for the new strategy period. The company's ongoing negotiations regarding its financing facility might be concluded before the CMD event, we believe. An assessment of the Marine and Offshore Unit is still ongoing and it is no longer included in full-year guidance. Overall, the execution of the strategic alignment conducted in summer 2024 to focus on core service operations has progressed well. We derive a lower fair value range of EUR 3.8-4.8 (4-5), which is based on a DCF model and backed by a peer group comparison. On our current estimates, Enersense's 2025E EV/EBIT is 5x. Marketing material commissioned by 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.