Dovre - Positioned to recover earnings
Dovre’s Q2 saw even more losses, although financial position still appears decent so long as recent problems will be fixed.
Weak Q2 results, yet financial position was quite strong
Dovre reported EUR 12.3m in Q2 revenue as Renewable Energy was down 47% y/y; the headline figures were known beforehand as projects in Sweden and Finland have had challenges since last year. Suvic’s projects have struggled financially for a while, although the Swedish wind projects which generated big losses are technically successful and will be completed soon. Suvic should still be able to capitalize on the long-term renewable energy demand trends playing out in Sweden and Finland, however the additional EUR 10m in Q2 losses means Dovre must correct its course soon. Dovre’s financial position was better than we expected, which was one positive about the report, so that it may still be able to take care of Suvic’s financing going forward. Reported net cash was EUR 18.8m, which gained from escrow funds release (due to the segmental sale) and changes in trade payables (so that it gives a bit too optimistic view of the financial position once the projects have been completed).
Earnings recovery potential assuming Suvic is stabilized
Suvic’s expansion to Sweden hasn’t paid off so far due to poor project management, but the market still has potential so long as Dovre successfully addresses the problems. Sweden should have enough industrial demand so that additional renewable energy capacity needs to be constructed; Finland has to some extent lacked such demand, which has been reflected in the recent drought of new wind farm projects, however demand remains high especially for battery storage as well as solar projects. Yet Finland now has some EUR 20bn in potential upcoming data center investments, which could also nudge some potential wind farm projects forward.
Low valuation multiples mostly justified at this point
The known figure of losses has increased since our previous update, while Dovre’s balance sheet appears better than we estimated despite the additional losses. Dovre is now valued around 4.5x EV/EBIT on our FY’26 estimates, a low figure justified by the big losses and consequent prolonged uncertainty around earnings recovery going towards next year. Near-term upside thus depends on a stabilizing H2’25 performance without further losses. Our new TP is EUR 0.17 (0.19) as we retain ACCUMULATE rating.