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.
