Dovre - Successful renewables focus transfer
Dovre’s Q2 results were close to our estimates. We don’t make any large estimate changes but note Dovre is already back to the EUR 8m EBIT level without the write-down.
Renewable Energy EBIT likely to be the biggest also in H2
Dovre’s EUR 50.9m Q2 revenue was slightly above our EUR 50.1m estimate as Project Personnel and Consulting were a bit low relative to our expectations while Renewable Energy more than made up. This was also reflected in the segments’ earnings as Renewable Energy achieved a very high Q2 EBIT of EUR 1.1m, and we believe its Q3 earnings will also set a new quarterly record. The EUR 1.9m EBIT Dovre posted, compared to our EUR 1.8m estimate, was also higher than the Q2’22 figure (a year when all the segments grew at double digits). We note Project Personnel and Consulting have recently faced some headwinds, yet Renewable Energy is now a lot less dependent on the Finnish wind power market and as a result its seasonal earnings profile is more stable.
EBIT could touch the FY ‘22 EUR 8.5m high water mark soon
Renewable Energy EBIT (excl. the write-down) has gained a lot and is now above the FY ’22 levels. We estimate Dovre will achieve ca. EUR 8m this year (excl. the EUR 5.8m write-down) and next as Renewable Energy achieves EBIT at a run rate of EUR 3.5-4.0m. We see Project Personnel EBIT down EUR 1m y/y this year but expect it to rise again above EUR 4m next year. In our view the more challenging Norwegian public sector market means Consulting EBIT will stay below EUR 2m also next year although it should stabilize at around 10% margin. We estimate Renewable Energy FY ’25 EBIT at EUR 3.5m, which would be a bit soft figure as the segment should post ca. EUR 4m this year excluding the write-down; the segment grows at a double-digit rate in FY ’24 which is likely to slow down, but in our view that shouldn’t pose any big margin headwinds. Hence our FY ’25 EBIT estimate seems conservative, and Dovre’s EUR 2-4m EBIT guidance suggests the company may already perform above our EUR 8m EBIT estimates.
Low valuation leaves a lot of upside potential
Dovre’s valuation remains undemanding as the EV/EBIT multiple, on our FY ’24-25 estimates excluding 49% of Renewable Energy EBIT, is only around 6x while peer multiples suggest the level could be a lot closer to 10x. We retain our EUR 0.50 TP and BUY rating.