Dovre - Patience required
Dovre completed its segmental sale for a significant cash pile, the eventual use of which remains an open question for now.
Renewable Energy should deliver a positive EBIT this year
Dovre has completed the sale of Project Personnel and Consulting Norway for a sum of EUR 28m, in addition to which another EUR 7m is expected. The negative profit warning however implies a loss of some EUR 10m in Q4 due to certain Renewable Energy projects. There were some challenges even earlier last year, but the learning curve for Suvic’s expansion appears to have been quite a lot steeper than previously estimated. Cost uncertainty continues into this year, so while we expect significant improvement EBIT is still likely to remain far below its potential even if Renewable Energy may well already reach EUR 100m top line. We estimate EUR 2m FY’25 Renewable Energy EBIT, which wouldn’t be a very high level given the likely volumes this year but is still subject to downside risks. We have however made only rather small estimate revisions to other functions & unallocated costs so far, as their level is to decrease significantly after the recent sale. We thus believe Dovre could report an EBIT of around EUR 1m this year.
EBIT to recover through better management and pricing
Suvic recently signed an EPC contract for a solar park of 100 MWp in Finland, the value of which was EUR 55m. This can be compared to the 102.2 MWp solar park contract announced a year before, which had a value of EUR 38m. The contract pricing thus indicates larger cost buffers from now on. We therefore expect Renewable Energy EBIT to gain also after FY’25 especially if Renetec starts to contribute significant results. A mid-single digit EBIT margin could then be achieved next year.
Valuation not very expensive if Suvic’s losses are now past
Dovre is valued about 7x EV/EBIT on our FY’25 estimates, which is still a bit high given the cost uncertainty and when 49% of Suvic’s results are due to the minority stake. We expect positive EBIT from Suvic going forward, and Renewable Energy should in our view achieve a clearly positive result already this year now that the ownership in Renetec is 100% while it has many projects soon ready for construction. Our new TP is EUR 0.30 (0.35) as our rating is ACCUMULATE (HOLD) according to the updated rating methodology (see p. 3).