Dovre - Stabilizing EBIT after high growth

Dovre’s Q3 EBIT topped our estimate as Project Personnel drove results. We see only moderate earnings growth prospects in the short term, yet valuation is undemanding.

Project Personnel helped EBIT amid high comparison figures

Dovre’s Q3 revenue fell 11.6% y/y to EUR 52.8m, close to our EUR 53.5m estimate. Top line would have been some 5% better than that at fixed FX rates as weak NOK had an impact. Renewable Energy was expected to decline relative to a more favorable comparison period, but its 38% y/y fall was clearly steeper than we estimated. The segment’s EBIT, however, was a bit better than expected. Consulting figures didn’t meet our estimates, but their softness was more than compensated by Project Personnel; the segment’s 6% EBIT margin helped drive Dovre’s EUR 2.7m EBIT above our EUR 2.2m estimate.

We estimate annual EBIT to pick up from around EUR 7m

In our opinion Project Personnel will not find annual 4% EBIT margin too high a hurdle, and hence we view EUR 4.5m EBIT a reasonable level for next year, assuming moderate growth. The segment could even land near EUR 5m annual EBIT, while Consulting’s annual rate appears to be roughly EUR 2m for now. In our view Consulting’s longer-term potential remains closer to EUR 3m should growth and margins pick up again. Renewable Energy still has most long-term upside, but a more challenging Finnish wind power construction market limits its potential for now. Both Consulting and Renewable Energy continue to face high comparison figures also for Q4, and neither were those of Project Personnel soft. We thus believe Dovre’s Q4 EBIT will weaken by some EUR 1m y/y. For next year we expect some reversion as Consulting and Renewable Energy will have room to improve, whereas Project Personnel may remain a bit soft or flat.

Short-term earnings growth modest, yet valuation is low

We estimate FY ’24 EBIT at EUR 7.3m, which would be only a marginal improvement on our FY ’23 estimate of EUR 7.1m. In our view Dovre still has potential to reach above 4% EBIT margin in the long-term as Consulting and Renewable Energy return to growth. Meanwhile valuation implies very modest expectations; Dovre is valued only some 6x EV/EBIT (excl. 49% of Renewable Energy EBIT) and peer multiples have also declined recently. We revise our TP to EUR 0.65 (0.80) and retain BUY rating.

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