Eolus had a difficult Q4. Although sales surprised positively at SEK 1,009m, 47% ahead of ABGSCe, the group EBIT came in at SEK -4m, compared to our forecast of a positive EBIT of SEK 52m. The 400 MW Öyfjellet project continues to be a problem and completion was further delayed to Q2’22. This is due to harsh weather conditions and COVID-related issues. Eolus has now written down project margins, which affected Q4 EBIT negatively. The sale of the US battery storage project Cald contributed around SEK 30m in EBIT in Q4, so losses from ongoing construction (including Öyfjellet of course) outpaced this good earnings contributor. The board of directors proposed a SEK 1.50 dividend, which implies a yield of ~2%.
New targets supportive for the long-term outlook
The company announced a new business plan for ’22-‘24. It aims to sell 1,000 MW per year on average during ’22-‘24 and from ‘25 it plans to sell 1,500 MW per year. This shows an ambition to grow from the current level of activity over the long term, which is positive. For ‘22e, we already expected sales of ~1,200 MW and have kept this unchanged, while we expect sales to be slightly below the target level for ‘23e. Much depends on the Centennial Flats project of ~750 MW, which we expect to be sold in Q4’22e. All in all, we lower ’22e-‘23e EBIT by 33% and 22%. We have assumed slightly longer construction times and lower project margins for all ongoing projects, which we think is reasonable given the recent project execution by the company.
Value range down to SEK 115-155 (190-250)
We lower our value range to SEK 115-155 from SEK 190-250, due to our lower earnings forecasts as well as to applying a higher WACC in our DCF. The stock is trading at very low ’22e-‘23e earnings multiples, which we think is a consequence of the recent challenges in project execution. We ...
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