Enersense |

A service provider of emission-free energy solutions

| Finland

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Financial overview

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Enersense - Earnings multiples are undemanding

03.11.2021 | Company update

Enersense Q3 figures didn’t meet our estimates, but the company retained its guidance, and we see the Q3 softness was to a large extent attributable to project timing issues.

Q3 figures were not as strong as we had expected

Enersense Q3 revenue was EUR 58.3m, compared to our EUR 63.8m estimate. The softness was due to Smart Industry, where top line was EUR 18.7m vs our EUR 23.9m estimate. July was slow and pretty much according to the company’s own expectations, as certain projects did not start until later. Power continued to reach good profitability, while Connectivity still has some work ahead on that front. International Operations’ profitability was burdened by challenges in the Baltic states, where e.g. inflation is more of a problem than in Finland. Enersense Q3 adj. EBITDA was EUR 4.4m vs our EUR 6.5m estimate. The company retained its guidance, which implies relatively strong Q4. In our view Enersense continues to progress well and according to their own plan, and the Q3 softness was to a large extent attributable to project timing issues.

Q4 estimates up a bit, some downward annual revisions

Enersense sees Q4 margin gains to be driven by Finland and we expect improved results already from Connectivity. The Baltic countries are a market where Enersense will find more attractive projects long-term, however we don’t expect alleviation to short-term profitability challenges during Q4. We now estimate Q4 adj. EBITDA at EUR 5.6m (prev. EUR 5.3m) and Q4 adj. EBIT at EUR 3.3m (prev. EUR 3.1m), and hence our FY ‘21 adj. EBITDA estimate is down to EUR 17.3m (prev. EUR 19.2m) and that for adj. EBIT to EUR 9.5m (prev. EUR 10.8m). The recent small acquisition of Pori Offshore Constructions got off to a good start as the company won a contract for a port of HaminaKotka project. Enersense still looks for additional smaller or larger M&A targets, and the company had some EUR 27m in cash at the end of Q3.

Peer group discount remains significant

We revise our FY ’21 profitability estimates down by some 10%, while we downgrade our FY ’22-23 estimates by only a few percentage points. Enersense’s peers’ earnings multiples have decreased by around 5% in the past few months, and thus we update our TP to EUR 11 (13). Enersense’s earnings-based valuation remains unchallenging; we retain our BUY rating.

Enersense - Soft Q3 but guidance intact

02.11.2021 | Earnings Flash

Enersense Q3 figures came in soft compared to our estimates, but the company nevertheless retains its FY ’21 guidance, which implies stronger than expected Q4. The Q4 tilt is due to project cycles and the result is a more balanced quarterly performance since Q3 is often the strongest quarter.

  • Enersense Q3 revenue amounted to EUR 58.3m, compared to our EUR 63.8m estimate. Smart Industry was EUR 18.7m vs our EUR 23.9m estimate, while Power amounted to EUR 12.5m vs our EUR 12.7m estimate. Connectivity top line was EUR 12.3m, compared to our EUR 13.7m estimate. International Operations was EUR 14.6m vs our EUR 13.5m estimate.
  • Adjusted EBITDA came in at EUR 4.4m vs our EUR 6.5m estimate, while adjusted EBIT was EUR 2.6m vs our EUR 4.2m estimate. Smart Industry EBITDA amounted to EUR 2.2m. Meanwhile Power EBITDA was EUR 1.1m and that for Connectivity EUR 0.8m. International Operations posted EUR 0.3m, where Latvian projects’ weak margin development was a drag.
  • Order backlog was EUR 272m at the end of Q3 (EUR 160m a year ago).
  • Enersense guides FY ’21 revenue in the EUR 215-245m range, while adjusted EBITDA is expected to be EUR 17-20m and adjusted EBIT EUR 8-11m (unchanged). The midpoints imply EUR 56.8m revenue, EUR 6.8m adj. EBITDA and EUR 3.4m adj. EBIT for Q4, compared to our respective EUR 63.9m, EUR 5.3m and EUR 3.1m estimates.

Enersense - According to plan

16.08.2021 | Company update

Enersense’s Q2 was much as expected. Margins are already decent, and we see plenty of scope for long-term gains.

Q2 figures did not reveal many surprises

Enersense’s Q2 revenue amounted to EUR 61.6m, compared to our EUR 57.5m estimate. We find the top line beat was for the most part due to International Operations (EUR 14.8m vs our EUR 11.5m estimate) as the other three segments were all close to our estimates. The positive surprise was in our view due to strong development in the Baltics, but France also contributed. Connectivity faced challenging winter conditions in Q2, but the segment’s revenue was nonetheless a bit above our estimate. There are no meaningful comparison figures due to the Empower acquisition, however Q2 profitability was as we expected. Adj. EBITDA came in at EUR 4.8m vs our EUR 4.7m estimate, while adj. EBIT was EUR 2.8m vs our EUR 2.6m estimate.

We make limited updates to our estimates

Empower integration proceeds according to plan and add-on acquisitions are possible already near-term. Enersense reiterated its current guidance and sees EUR 215-245m in revenue while adj. EBITDA should be in the EUR 17-20m range (adj. EBIT EUR 8-11m). We have made only minor revisions to our estimates and expect Enersense to land near the upper end of the guidance range. Enersense has a long-term EBITDA margin target of 10% (by 2025); we see the company is headed close to 8% already this year and 8.5% doesn’t seem that challenging to achieve in the year following. We continue to expect 4.6% organic growth in FY ’22, meaning Enersense should reach at least EUR 21m in EBITDA and EUR 12m in EBIT then.

Organic performance and low multiples underpin upside

Enersense is valued 5x EV/EBITDA and 9x EV/EBIT on our FY ’22 estimates. We find the earnings multiples imply a sizeable discount relative to peers while Enersense’s organic growth outlook and profitability are, in our view, in line with the general sector estimates. Our EBITDA margin estimates are also on the conservative side compared to Enersense’s 10% target and we expect only some 3.5% organic CAGR for the coming years, whereas Enersense’s own EUR 300m long-term organic top line target implies a CAGR many percentage points above our estimates. We retain our EUR 13 TP and BUY rating.

Enersense - Profitability as expected

13.08.2021 | Earnings Flash

Enersense’s Q2 report didn’t offer many surprises. Enersense’s operations and strategy seem to proceed pretty much according to plan.

  • Enersense Q2 revenue was EUR 61.6m vs our EUR 57.5m estimate. Smart Industry top line was EUR 23.5m, compared to our EUR 23.5m estimate. Power came in at EUR 12.0m (vs our EUR 11.5m estimate), while Connectivity was EUR 11.4m (vs our EUR 11.0m estimate).
  • Adjusted EBITDA was EUR 4.8m vs our EUR 4.7m estimate. Meanwhile adjusted EBIT amounted to EUR 2.8m vs our EUR 2.6m estimate. Smart Industry EBITDA amounted to EUR 5.1m. Power and Connectivity respectively reached EUR 0.9m and EUR 0.5m in EBITDA. Connectivity saw relatively challenging weather conditions in Q2.
  • Order backlog stood at EUR 301m at the end of Q2 (EUR 292m at Q4’20).
  • Enersense retains its guidance and expects to see 2021 revenue in the EUR 215-245m range, adjusted EBITDA at EUR 17-20m and adjusted EBIT at EUR 8-11m.

Enersense - Growth strategy proceeds

22.06.2021 | Company update

Enersense completed its directed share issue and thus raised some EUR 16m in gross proceeds. The company is looking into some growth initiatives that would deploy the capital. These could involve organic growth prospects but in our opinion M&A is also high on the agenda. We have made small adjustments to our estimates. Our TP is now EUR 13 (11) and we retain our BUY rating.

Current markets offer both organic and M&A potential

Enersense already had a healthy balance sheet with a positive net cash position and there wasn’t any acute pressing need to raise additional cash. The company had some EUR 23m in cash at the end of Q1. This suggests there will now be close to EUR 40m in available funds plus possible additional debt facilities. In our opinion such an amount could enable Enersense to acquire targets with around EUR 100m in revenue, considering the relatively low EV/S multiples seen across the relevant sectors. At this point it remains unclear which segment Enersense might be looking to bolster. In our view Enersense has wide M&A opportunities in both Finland and abroad. The Finnish Power market is currently driven by e.g. wind power investments, while 5G will remain a major driver for Connectivity for years to come. Enersense is already a big Finnish player in these two related construction and maintenance markets, and there remain some smaller service suppliers the company might be contemplating to acquire. The Finnish smart industry market, by contrast, represents a much wider opportunity set, not to mention the potential overseas scope.

Long-term financial target amounts to EUR 30m in EBITDA

We make small adjustments to our estimates following the transaction. We understand Empower synergies continue to materialize well and we see the company is on track to reach annual EUR 20m run-rate EBITDA in the near-term, while the long-term target implies EUR 30m.

Valuation remains undemanding relative to potential

Enersense still trades at modest multiples, and the ca. 6x EV/EBITDA and 11x EV/EBIT on our estimates for next year represent meaningful discounts compared to peers. Our new TP is EUR 13 (11) and we retain our BUY rating.

Enersense - Updated estimates due to transition to IFRS reporting

11.05.2021 | Company update

On Thursday, Enersense announced the transition to IFRS reporting and new guidance. Enersense expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. We have updated our estimates in accordance with IFRS reporting and retain our TP of EUR 11 and BUY-rating.

Staff Leasing segment will be discontinued
Enersense announced the transition to IFRS reporting and published consolidated financial statements for 2020 and 2019. With the transition, the company updated its guidance and expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. Enersense also announced that it has agreed to sell the entire share capital of its subsidiary Värväämö Oy to Citywork Oy. Staff Leasing segment will be discontinued and it will be reported as part of Smart Industry. Thus, the company will report its revenue in the future based on four segments; Power, Smart Industry, Connectivity, and International Operations.

We expect net sales of EUR 235.1m, adj. EBITDA of EUR 18.8m and adj. EBIT of EUR 10.4m in 2021E
We have adjusted our estimates with the transition to IFRS. Due to the divestment of Värväämö, we have decreased our net sales estimate for 2021E to EUR 235.1 million (prev. EUR 242m). Our growth estimates of 4.6% and 3.9% for 2022E-23E are unchanged. In 2021E, we expect adj. EBITDA of EUR 18.8m (8% margin) and adj. EBIT of EUR 10.4m (4.4% margin), respectively. We note that Enersense has not provided IFRS figures for Q1/21 and Q1/21 figures below are our estimates.

No changes to our recommendation
Based on our updated estimates, we have not made changes to our recommendation. We retain our TP of EUR 11 and BUY-rating.

Enersense - Good start to the year

05.05.2021 | Company update

Enersense reported a better-than-expected Q1 result and 9% increase in the order backlog compared to the end of Q4/20. The company also announced that it has concluded negotiations on a new financing package. We have made upward revisions to our estimates and raise our TP to EUR 11 (9.7), BUY-rating intact.

Orders increased especially in Power and the Baltics
Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Order backlog increased by 9% from EUR 292m at the end of 2020 to EUR 319m at the end of Q1. Orders increased especially in the Power segment and the Baltics. Enersense also announced that it has concluded negotiations on a new financing package, which will be used to develop operations and manage working capital.

Our revised estimates are at the upper end of the guidance
Q1 is typically a challenging quarter for Enersense due to the weather conditions, and revenue and profitability are expected to increase towards the end of the year. The order backlog continued to grow rapidly in Q1 and according to the management, the market outlook is very positive as demand is expected to remain strong especially in Power and Smart Industry. Supported by increased orders and good outlook, we have raised our 2021E net sales estimate to EUR 242m (prev. EUR 230m). We have also made upward revisions to 2022-23E sales estimates, and forecast 4.6% and 3.9% growth, respectively. We expect adj. EBITDA to increase from EUR 8.9m to EUR 14.4m in 2021E. Both our net sales and adj. EBITDA estimates are at the upper end of guidance for 2021 (net sales: EUR 215-245m, adj. EBITDA: EUR 12-15m).

BUY with a target price of EUR 11 (9.7)
On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.6x and adj. P/E of 10.8x, which translate into discount of 23-30% to our peer group median. Better-than-expected results in Q1, renegotiated short-term financing and continued growth in the order backlog increase our confidence in the investment case, and we raise our TP to EUR 11 (9.7), BUY-rating intact. Our TP values Enersense at EV/EBITDA of 6.3x and adj. P/E of 12.3x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s currently lower profitability profile. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, we see further upside potential in valuation.

Enersense - Strong Q1 beat our expectations

04.05.2021 | Earnings Flash

Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Enersense also announced that it has concluded negotiations on a new financing package.

  • Net sales in Q1 amounted to EUR 52.4m, beating our estimates (Evli EUR 44.5m).
  • Adjusted EBITDA also exceeded our expectations and was EUR 1.7m (Evli EUR 0.5m).
  • Order backlog at the end of the first quarter amounted to EUR 319m, growing by 9% from EUR 292m at the end of 2020.
  • Guidance reiterated: Enersense expects net sales to be EUR 215-245 million in 2021. EBITDA excluding non-recurring costs related to integration is estimated to be EUR 12-15 million in 2021.
  • Enersense also announced that it has concluded negotiations on a new financing package. The company will replace the existing EUR 12.7 million short-term financing facilities with two senior loans, totaling EUR 12m. Each senior loan amounts to EUR 6m and will mature in 2026. Enersense also replaces a part of its previous bank guarantee facilities with the new bank guarantee facilities. Enersense has bank guarantee facilities totaling EUR 36.9m and invoice financing facilities totaling EUR 41.5m.

Enersense - Initiating coverage with BUY

17.03.2021 | Company report

We initiate coverage of Enersense with a BUY rating and a TP of EUR 9.7. Enersense’s turnaround in profitability progressed well in 2020 and, in our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition.

2020 was a big year for Enersense
Enersense International Oyj is a service provider of emission-free energy solutions in the industry, energy, telecommunication, and construction sectors. In 2020, Enersense’s business changed significantly. Enersense acquired Empower, thus expanding its business from recruiting and resource management services to a solution provider for the Smart industry, Power, and Connectivity markets. Enersense also managed to improve its EBITDA from EUR -0.8m in 2019 to EUR 7.2m in 2020. The focus in 2021 is on improving profitability, growing in domestic and selected international markets, and continuing the integration of the Empower acquisition.

Our estimates for 2021E are at the midpoint of the guidance
In 2021E, we expect Enersense’s net sales to grow strongly as Empower’s figures are included in net sales for the full year. The order backlog has increased significantly from EUR 130m in August 2020 to EUR 300m at the end of 2020 and we expect this strong order inflow to support Enersense in reaching net sales of EUR 230m. In 2022-23E, we forecast the group revenue to grow by 3.2% and 3.0%, respectively. We estimate adj. EBITDA to increase from EUR 8.9m (6.2% margin) to EUR 13.5m (5.9% margin) in 2021E driven by the consolidation of Empower’s full-year figures, a healthier project portfolio, and streamlining of operations. We expect the synergies of the Empower integration to be more visible in Enersense’s profitability from 2022 onwards and EBITDA margin to increase to 6.5% in 2022E and 6.8% in 2023E.

BUY with a target price of EUR 9.7
In our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition. On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.5x and adj. P/E of 10.7x, which translate into discount of 21-28% to our peer group median. We initiate coverage with a BUY-rating and a target price of EUR 9.7. Our TP values Enersense at EV/EBITDA of 6.1x and adj. P/E of 11.8x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s lower profitability profile and as we look for more signs of further margin improvement and faster organic growth. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, there is further upside potential in valuation.

Q1_2021-liiketoimintakatsaus, Enersense International Oyj

Enersense - Q1'21 webcast (in Finnish)

04.05.2021

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Company Facts

Guidance

Enersense guides 2021 revenue to be in the EUR 215-245m range, while adjusted EBITDA is to be EUR 17-20m and adjusted EBIT EUR 8-11m. 

Financial targets

Growth: Net sales of EUR 300 million through organic growth by 2025. Profitability: EBITDA margin of 10% by 2025.

Share price (EUR)


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