Dovre - High Renewable Energy demand
Dovre’s EUR 2.4m EBIT was soft relative to our estimate despite the high top line, but in our view valuation is low relative to the annual EUR 8m EBIT level.
Some seasonal fluctuation in quarterly earnings levels
Dovre’s EUR 63m Q3 revenue topped our EUR 58m estimate due to the 73% y/y growth in Renewable Energy, driven by solar and wind projects in Sweden and Finland. Project Personnel and Consulting were a bit soft relative to our estimates, and the EBIT margin of Renewable Energy was also lower than we estimated, so that the EUR 2.4m EBIT came in lower than our EUR 2.9m estimate. In our view Dovre likely lands near the upper end of its revenue guidance; Q4 EBIT should improve by at least some EUR 1m y/y as the comparison period was soft. We expect Dovre’s EBIT will remain roughly around the level of EUR 8m (excluding the write-down) this year and next as Project Personnel and Renewable Energy will both continue to generate about EUR 4m.
Solar power construction projects remain a major driver
The softness in Project Personnel this year means FY’25 will have an undemanding comparison period so that its revenue and EBIT should again grow, while Renewable Energy’s growth seems set to continue even if at a lower rate. There are around 200 potential solar projects in Finland alone, worth up to ca. EUR 5bn (confirmed decisions of about 10% of that). The economics tend to be more favorable than those of wind projects due to the relatively small size (about EUR 25m investment on average) and thus often rather straightforward to complete in comparison to much larger wind parks. The Finnish market is still smaller than the Swedish one, but it has potential to reach a higher relative growth rate in the coming years. There’s thus a lot of demand for the services of Suvic and Renetec, although the construction market also has enough supply so that margins are often not huge (however the business neither ties much capital).
Valuation low relative to the EUR 8m group EBIT level
We make revisions so that our revenue estimates increase while our earnings estimates are down a bit, and margin estimates decrease by some 20-30bps. Dovre’s valuation remains around 6x EV/EBIT on our FY’25 estimates (excl. the RE minority). We retain our EUR 0.50 TP and BUY rating.