Enersense |

A service provider of emission-free energy solutions

| Finland

Financial overview

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Enersense - Organic as well as inorganic growth

31.10.2022 | Company update

Enersense Q3 report didn’t contain major surprises. Profitability is set to improve with growth and inflation compensation, but at least Q4 may see muted bottom line.

Not many surprises while order backlog is now tall

Q3 revenue was EUR 64.4m vs our EUR 65.4m estimate. The 10.5% y/y growth was driven by all segments except Smart Industry, where the lower volumes of the OL3 project left a gap soon to be filled by the EUR 200m Helen contract. Low volumes, inflation, and Offshore ramp-up hurt margins, while the segment’s EBITDA gained from EUR 2.1m in items due to a capital gain as well as a change to the considerations related to an acquisition. Enersense’s headline EUR 4.3m EBITDA was above our EUR 2.0m estimate, but in line considering the one-offs. There were some items, such as Power’s costs with Megatuuli, which weren’t there to burden the comparison period. Connectivity EBITDA increased, however orders remained muted for now as top line is driven by long-term agreements, some of which should be signed soon. Meanwhile Power backlog doubled.

Both organic and inorganic growth to be seen

We would expect Enersense’s organic growth to help it reach healthy profitability levels in FY ’23, while the Baltics are likely to continue to dilute margins for a while. The Voimatel deal’s EUR 130m revenue and EUR 4m EBITDA, at an EV of EUR 10m, would add a lot of value with significant cost synergies but is yet to be approved by the competition authorities. The expansion to EV charging technology is another strategic addition. The initial Unified Chargers price tag is negligible, while it remains to be seen just how much value the deal will add (competition includes e.g. Kempower). The ERP project will continue next year while Offshore projects should begin to contribute then.

Q4 margins uncertain, but bound to get better next year

In our view Enersense is positioned for at least a high single-digit growth next year. Enersense’s guidance suggests there’s still a lot of uncertainty around Q4 profitability, in our view due to inflation and the fact that seasonal project patterns have been different this year. Enersense is valued some 5x EV/EBITDA and 10x EV/EBIT, which are not high levels compared to peers while there remains uncertainty around the improvement pace. We retain our EUR 6.0 TP and HOLD rating.

Enersense - Relatively good development

28.10.2022 | Earnings Flash

Enersense’s Q3 profitability topped our estimates as EBITDA development was favorable in all other segments except International Operations, where we believe inflation continues to be more of a problem than in Finland.

  • Enersense Q3 revenue grew 10.5% y/y to EUR 64.4m, compared to our EUR 65.4m estimate. Revenue grew in all other segments except Smart Industry, where the 18% y/y decline was mainly due to the lower volumes of the Olkiluoto 3 project. Power and Connectivity top lines were close to our estimates.
  • Adjusted EBITDA landed at EUR 4.3m vs our EUR 2.0m estimate, while EBIT was EUR 1.9m vs our EUR -0.3m estimate. EBITDA improved in Power as well as Connectivity while it remained flat in Smart Industry. International Operations saw EBITDA decrease due to high inflation in the Baltics. Q3 EBITDA was burdened by investments in offshore wind power and a new ERP system to the tune of EUR 1.0m. Enersense has managed to negotiate price increases for new as well as existing contracts to compensate for inflation.
  • Order backlog amounted to EUR 385m at the end of Q3, while it was EUR 272m a year ago. Smart Industry order backlog increased significantly, including the EUR 100m agreement with the energy company Helen (EUR 200m including the options to extend the agreement). Development was strong also in Power.
  • Enersense guides FY ’22 revenue to be in the EUR 245-265m range and adjusted EBITDA EUR 6-12m (unchanged).

Enersense - Results are burdened on many fronts

05.08.2022 | Company update

Enersense’s Q2 was weak, and H2 is set to remain modest. There’s still much uncertainty around the improvement slope, however valuation appears neutral relative to peers.

Inflation and certain low project volumes hurt Q2 results

Enersense’s Q2 top line declined 3% y/y to EUR 59.8m. The softness was mostly due to Smart Industry, where e.g. lower Olkiluoto project volumes explained the fall. The war also led to project delays, and the ICT strike hurt volumes within Connectivity (it also suffered from inflation particularly due to fuel). Inflation, which in the case of Enersense mostly means higher metal and fuel prices, is especially a problem in the Baltics, where long contracts also add to the pain. International Operations thus saw a marked decline in profitability even when revenue grew by 14% y/y. Existing framework agreements suffer from inflation, although Enersense has been able to make some progress in adjusting their rates for higher costs. Power fared relatively well due to its more dynamic nature of business.

Enersense continues to work towards its targets

Inflation was a major issue as adj. EBITDA fell to EUR -0.4m from EUR 4.8m a year ago. Enersense sees Q3 as the most profitable quarter also this year even though inflation continues to hurt results in H2. Investments in offshore wind capabilities will still be a burden in H2, in addition to which ERP investments are set to continue for a few years. H2 profitability will remain far below potential, but volumes continue to grow as recent orders announced over the summer indicate. There are also no major issues with e.g. labor availability. Enersense recently announced the acquisition of Voimatel to add to Connectivity and Power, but the deal still waits for competition authority approvals.

Valuation appears broadly in line with peers

We cut our FY ’23 adj. EBITDA estimate to EUR 16.7m from EUR 22.2m due to the current challenges. Enersense is valued some 5.5x EV/EBITDA and 12x EV/EBIT on our FY ’23 estimates. The earnings multiples are broadly in line with those of peers; there remains much uncertainty around next year’s margins, but our estimated 2.9% EBIT is still not that high a level. Enersense’s multiples are close to Eltel’s, and the two are also similar in the sense that FY ’22 results are set to be modest for both. Our new TP is EUR 6 (8); we retain our HOLD rating.

Enersense - Challenges will continue in H2

04.08.2022 | Earnings Flash

Enersense’s Q2 results were known before the official release as the company disclosed preliminary figures in connection with a negative earnings guidance revision.

  • Enersense Q2 revenue amounted to EUR 59.8m, down by 2.9% y/y. Power revenue grew 17% y/y to EUR 14.0m, while International Operations grew by 14% to EUR 16.8m. Smart Industry declined by 20% to EUR 18.7m and Connectivity by 10% to EUR 10.2m.
  • Q2 adjusted EBITDA was EUR -0.4m, compared to EUR 4.8m a year ago. Profitability declined the most in Smart Industry, followed by Connectivity and International Operations, whereas Power managed relatively strong absolute EBITDA. Inflation was a major negative affecting the results throughout the group, but there were also some project volume issues as well as the six-week ICT strike in Finland which had an impact on Connectivity. H1’22 adjusted EBITDA also includes EUR 2.4m in investments in offshore wind power and a new ERP system.
  • Order backlog amounted to EUR 295.4m at the end of Q2. The order backlog contracts partially reflect increased pricing adjusted for inflation, whereas new contracts better reflect the cost pressure.
  • Enersense guides EUR 245-265m in revenue and EUR 6-12m in adjusted EBITDA for FY ’22. Inflation continues to cast uncertainty over H2’22 results and project starts may also be delayed.

Enersense - CMD notes

04.05.2022 | Company update

The CMD added color on Enersense’s plans to expand its print in the renewables value chain. Wind power, on sea as well as land, is the key in multiplying revenue and earnings as the company will both develop and own wind farms.

EUR 500m revenue and EUR 100m EBITDA by 2027

Enersense targets EUR 300m revenue for the current construction and EUR 100m for the current wind power business by 2027. The former would contribute EUR 30m EBITDA and the latter EUR 35m. The Megatuuli acquisition helps the company to have a say on the kinds of wind power projects that get developed. Proprietary renewables production is to be ramped up to EUR 100m revenue, or 600-700MW of mostly Finnish onshore wind power capacity, which requires some EUR 300m of equity-like capital (assuming 40% equity ratio, depending on the exact financing structure, which we assume could include e.g. hybrid instruments). The projects would be valued at some 20x EV/EBITDA (an IRR of around 5-10%). Enersense develops its offshore wind power platforms to tackle the pack ice challenges. The Baltic wind power market also has plenty of growth potential as there’s not yet much local capacity.

Wind power dominates, but other renewables also figure in

The Finnish wind power market is now the most important but not the only focus area. Enersense also has interest towards solar energy as the company views it an overlooked source in Finland. Within nuclear power Enersense is involved in France and the UK, besides Finland. The new European project of energy self-sufficiency in general greatly helps Enersense’s long-term outlook and includes such concrete prospects as the Baltic transmission network’s desynchronization from the Russian system. Another opportunity is found in Finland, where the EV stock is expected to grow at an above 20% CAGR during this decade. There’s always the potential for some additional M&A, but we believe the already identified renewable production pipeline will claim most of the focus during the years to come.

The transformation happens gradually over the years

We make no changes to our estimates for now, but it’s clear Enersense’s financial profile is going to change a lot over the coming years as the company begins to add its own renewable energy production. We retain our EUR 8 TP and HOLD rating.

Enersense - Inflation resistance to be tested

02.05.2022 | Company update

Enersense’s Q1 profitability figures beat our estimates but cost inflation can hurt figures more during the rest of the year. Long-term outlook remains favorable thanks to the green vertically integrated strategy, but we view current valuation overall fair.

Strong headline EBITDA, but mixed results underneath

Enersense’s revenue was up by 1% y/y to EUR 53.8m, compared to our EUR 54.2m estimate. Smart Industry’s figures declined due to the Staff Leasing sale as well as the lower than estimated Olkiluoto nuclear power plant volumes. The Olkiluoto project hit profitability, and together with the Enersense Offshore integration helped produce an EBITDA of EUR -1.0m. Connectivity and International Operations were able to grow at double-digit rates as Covid-19 was no longer a major issue, but their EBITDA declined due to inflation. Power grew a lot more than we expected and contributed to the group EUR 5.5m adj. EBITDA, compared to our EUR 2.7m estimate, as high revenue, project execution and Megatuuli acquisition drove profitability.

Cost inflationary effects on H2 figures remain to be seen

Enersense retains its guidance as the war causes some project delays this spring and hence Q2 figures will be relatively low. Q3 and Q4 should again be comparatively strong (winter and spring are always somewhat quiet), but inflation and material availability add to uncertainty. The underlying improvement pace in H2 is still unclear especially when acquisitions have complicated the picture. We revise our adj. EBITDA estimates down by 17% for the remainder of the year while our revenue estimate is almost intact. The war and its effects may have a short-term negative effect on Enersense’s performance, but its long-term consequences are likely to be beneficial ones as governments accelerate e.g. wind power investments.

We consider current valuation neutral

Enersense’s multiples for the next few years are still low relative to peers, assuming profitability continues to improve, whereas the multiples for FY ’22 represent a slight premium. We therefore argue the current valuation is overall fair in the current high inflation environment. Successful execution and strong underlying profitability in H2 would be a likely upside driver. We retain our EUR 8 TP. Our rating is now HOLD (BUY).

Enersense - Profit figures topped our estimates

29.04.2022 | Earnings Flash

Enersense’s Q1 profitability figures topped our estimates. The company reiterates its guidance, however Q2 profitability will be relatively weak this year due to project delays caused by the war.

  • Q1 revenue was EUR 53.8m, compared to our EUR 54.2m estimate. Smart Industry amounted to EUR 16.6m vs our EUR 22.5m estimate, while Power was EUR 14.3m vs our EUR 11.2m estimate. Connectivity came in at EUR 9.3m, compared to our EUR 8.6m estimate, International Operations EUR 13.5m vs our EUR 11.9m estimate.
  • Adjusted EBITDA landed at EUR 5.5m vs our EUR 2.7m estimate. EBIT was EUR 3.2m, compared to our EUR 0.4m estimate.
  • Order backlog was EUR 295.5m at the end of Q1.
  • Enersense expects Q2 to be the weakest quarter this year in terms of profitability as the war has caused delays in projects during the spring. Inflation, material availability issues and virus infections can also delay projects and impair their profitability.
  • Enersense guides EUR 245-265m in revenue and EUR 15-20m in adjusted EBITDA for FY ’22 (unchanged).

Enersense - Favorable tailwinds set to continue

01.03.2022 | Company update

Enersense’s Q4 figures were a bit higher than we estimated, earnings guidance was softer, but the overall picture hasn’t changed much as renewables remain in high demand.

No major surprises in connection with the report

Enersense’s Q4 top line declined by 3% y/y, mostly due to the sale of Staff Leasing business, to EUR 65.9m and was above our EUR 63.0m estimate. The revenue beat was largely due to International Operations, but Power was also above our estimates. Certain M&A related items, both positive and negative, affected results, but overall profitability was slightly above our estimates. Infections continued to bother in certain projects, however these are unlikely to be a major issue going forward. Long-term profitability improving investments in IT and offshore wind power business will burden results this year, and we revise our FY ’22 profitability estimates down by some EUR 3m.

Latest macro changes are more likely to be supportive

There is some inflation risk, especially in the Baltics as the local contracts are long, but the contracts tend to compensate for cost pressures as now seen to some extent in raw materials and wages. Enersense has expanded its value chain presence with two recent acquisitions, and these don’t involve any significant integration issues. Enersense will also update its long-term targets later in H1’22 (the current target is 10% EBITDA margin by 2025 whereas we estimate 7.3% margin for FY ’22). Offshore wind power is a major growth driver going forward as it is a relatively underdeveloped space compared to onshore. The latest shifts in geopolitics do not in our view pose significant risks for Enersense, rather they are bound to accelerate the European transfer away from hydrocarbons and major initiatives in e.g. Germany could yet play out favorably for Enersense’s strategy.

Valuation is not challenging in either short or long term

Our EUR 18.2m EBITDA estimate for FY ’22 lands a bit above the midpoint of the EUR 15-20m range, which we don’t view very challenging. The respective 5.5x EV/EBITDA and 12x EV/EBIT multiples aren’t high compared to peers, and valuation is even more attractive in the long-term perspective as Enersense should achieve relatively steep earnings growth. Peer multiples have, however, continued to decline in the past two months and we update our TP to EUR 8 (10). Our rating remains BUY.

Enersense - Figures mostly in line

28.02.2022 | Earnings Flash

Enersense’s Q4 report was overall relatively close to our expectations. The Q4 figures came in a bit higher than we estimated, while guidance represents a small miss in terms of profitability. The BoD however proposes a dividend of EUR 0.1 per share to be paid, which we did not expect.

  • Enersense Q4 revenue was EUR 65.9m vs our EUR 63.0m estimate. Smart Industry amounted to EUR 21.0m vs our EUR 21.5m estimate. Power was EUR 13.8m vs our EUR 12.5m estimate. Connectivity was EUR 13.2m, compared to our EUR 14.8m estimate, while International Operations was EUR 18.0m vs our EUR 14.2m estimate.
  • Adjusted EBITDA landed at EUR 7.5m, compared to our EUR 7.4m estimate. Adjusted EBIT was EUR 5.8m vs our EUR 5.1m estimate. Smart Industry EBITDA amounted to EUR 6.6m, while Power EBITDA was EUR 0.0m. Connectivity was EUR 0.7m and International Operations was EUR 0.3m.
  • Order backlog was EUR 291m at the end of Q4 (EUR 292m a year ago).
  • Enersense guides FY ’22 revenue to be between EUR 245-265m (vs our EUR 247m estimate) and adjusted EBITDA EUR 15-20m (vs our EUR 21.0m estimate). Investments in the new ERP system as well as in growing offshore wind power will burden results.
  • The BoD proposes EUR 0.1 per share dividend to be distributed, compared to our EUR 0 estimate.

Enersense - Some more green to come

04.01.2022 | Company update

Enersense’s Q3 report was soft and left doubts with respect to the FY ’21 guidance. The company has now made upgrades to the guidance, but these seem to have been to a large extent driven by acquisition-related revaluations. Enersense nevertheless continues to progress with long-term strategy and is about to close two investments.

We make some updates to our Q4 adj. EBIT(DA) estimates

Enersense revised its FY ’21 earnings guidance upwards. Enersense still expects EUR 215-245m in revenue, but now sees adj. EBITDA over EUR 19m (prev. EUR 17-20m) and adj. EBIT over EUR 11m (prev. EUR 8-11m). We leave our revenue estimate unchanged, update our Q4 adj. EBITDA estimate to EUR 7.4m (prev. EUR 5.6m) and that for adj. EBIT to EUR 5.1m (prev. EUR 3.3m). The underlying performance remains somewhat unclear because the guidance update was driven by revaluations related to the Enersense Offshore Oy acquisition.

Long-term earnings growth outlook should solidify

Enersense is about to expand its renewable energy solutions scope with the closure of two acquisitions in a month or so. The company will buy a significant stake in a green hydrogen producer called P2X and acquire an onshore wind farm developer in an all-share transaction. The latter target will be earnings accretive already in FY ’22; the acquisition of Megatuuli will contribute a cumulative EUR 20-40m in EBIT by 2025. Meanwhile an ERP investment will burden results this year along with a process related to the integration and development of Enersense Offshore, however the latter initiative should contribute to results in FY ’23. We leave our estimates for FY ’22 and ’23 unchanged for now, but Enersense will update its long-term financial targets in Q1.

Valuation remains undemanding

Enersense’s peer multiples have stayed pretty much unchanged over the past few months. Enersense continues to trade at modest multiples relative to peers. We believe Enersense’s vertical integration within the renewables value chain beyond construction and maintenance activities will help balance business risks, and hence long-term upside remains significant. Meanwhile short-term visibility isn’t still that great and thus we lower our TP to EUR 10 (11). Our rating remains BUY.

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.

HubSpot Video

Enersense - Q1'21 webcast (in Finnish)

04.05.2021

Annual and sustainability reports

10.03.2022

Annual report 2021

Company news

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Company Facts

Guidance

Enersense guides 2022 revenue to be in the EUR 245-265m range, while adjusted EBITDA is to be EUR 6-12m

Financial targets

EUR 500m in revenue and EUR 100m in EBITDA by 2027

Share price (EUR)


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