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Dovre - Many energy sector opportunities

Dovre’s Q2 results landed near our estimates. Renewable Energy drags EBIT this year, but demand remains in place and all segments still have room to improve going forward.

Renewable Energy Q2 EBIT proved better than we estimated

Dovre’s Q2 top line developments were twofold: on the one hand Project Personnel continued to grow at a strong rate of 15.7% y/y, driven by demand in Canada, while Consulting saw a slower quarter after strong Q1 (Q2 revenue was down by 13.5% y/y as new Norwegian legislation on temporary hiring affects the public sector market of Consulting more than it does the energy sector of Project Personnel). Renewable Energy revenue declined much as expected, however its EUR 0.5m EBIT was a positive surprise as it improved a bit y/y. Project Personnel’s strong performance pushed Dovre’s EUR 47.3m revenue above our EUR 44.4m estimate, whereas Renewable Energy’s bottom line performance helped the EUR 1.5m EBIT slightly above our EUR 1.4m estimate.

Renewable Energy is likely to drive growth next year

Project Personnel has grown at a CAGR of 18% after FY ’20; the comparison figures are high, but we continue to expect further incremental growth in H2. We see Consulting top line flat or slightly down for the year after double-digit growth in recent years, whereas Renewable Energy should again see growth next year as new Finnish electricity transmission capacity opens construction bottlenecks. We estimate Project Personnel EBIT to develop flat this year and next but note there should be more potential towards an EBIT margin of 5%. We estimate Consulting EBIT down EUR 0.3m this year; the legislation on temporary hiring limits potential, and we have been expecting more moderate growth for the segment compared to the other two.

Earnings multiples remain undemanding

In our view Dovre is likely to land near the upper end of its revenue guidance range, while we note Q3 is important for EBIT due to the seasonality of Renewable Energy. Our group-level estimate revisions remain small while peer multiples have gained recently; Consulting peer multiples are rather high at around 16x EV/EBIT, but we have also revised down our estimates for the segment. Dovre is valued only 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic EBIT), while most peers trade well above 10x. Our new TP is EUR 0.80 (0.77); we retain BUY rating.

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