Global Decarbonization Will Fuel Offshore Wind Expansion

Key Takeaways

• Robust order book, advanced technology, and strategic acquisitions position DEME for accelerated revenue growth, margin expansion, and market share gains in offshore wind and infrastructure.
  
• Global decarbonization and urbanization trends provide strong, sustained tailwinds for high-margin projects, underscoring DEME's leadership and long-term earnings potential.
  
• Heavy reliance on offshore renewables, flat order book, project execution risks, high capex needs, and intensifying global competition threaten margin stability and revenue growth.

Catalysts

Provides marine solutions in the fields of offshore energy, dredging, marine infrastructure, and environmental works in Belgium, Europe, Africa, the United States, Asia, Oceania, and the Middle East.

• Analysts broadly agree that DEME's €7.5 billion order book underpins stable future revenue, but they may underestimate its potential; with 2026 already 2/3 secured versus historic turnover and robust tendering activity in progress, revenue visibility is likely superior and could support both accelerated topline growth and operating leverage.
  
• While the consensus sees structural margin improvement from advanced vessel utilization and fleet expansion, recent EBITDA margins in Offshore Energy have climbed rapidly to all-time highs above 31% and are buoyed by next-generation vessels and proprietary automation, setting the stage for a sustained step-change in group profitability well above historic management targets, particularly as operational scale and technology advantages compound.
  
• DEME's strategic M&A, especially the Havfram acquisition and joint ventures in Asia and Japan, positions the company as a consolidator of the offshore wind installation market just as offshore wind supercycles are set to accelerate globally-unlocking outsized future growth and potential market share gains, which should drive both revenue expansion and premium margins.
  
• Global decarbonization efforts-including rising offshore wind targets in Europe, Asia-Pacific, and the US-are at an unprecedented inflection point, and with new high-capacity vessels already contracted into 2029, DEME is exceptionally well positioned to outgrow peers and accelerate earnings as these multi-decade renewables tailwinds intensify.
  
• Increased global urbanization and a surge in climate adaptation investments are driving a wave of critical dredging, infrastructure, and coastal protection work, and DEME's diversified business model, track record, and expanding international footprint put the company on the cusp of capturing incremental, high-margin projects-supporting a long runway for both top-line and net profit growth.

DEME Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on DEME Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming DEME Group's revenue will grow by 3.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 7.6% today to 7.5% in 3 years time.
• The bullish analysts expect earnings to reach €359.6 million (and earnings per share of €14.19) by about August 2028, up from €326.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.7x on those 2028 earnings, up from 10.0x today. This future PE is greater than the current PE for the BE Construction industry at 11.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

DEME Group Future Earnings Per Share Growth

Risks

• The Offshore Energy segment now accounts for over half of turnover, making DEME increasingly dependent on the offshore wind and renewables sector; this concentration exposes future earnings and revenue growth to shifts in government policy or technological change in renewables that could negatively impact project pipelines.
  
• Despite management optimism, the order book has remained flat year-on-year and organic backlog is down 15 percent excluding acquisitions, indicating challenges in new contract intake and raising the risk of order book shortfalls that could weigh on future revenue visibility and EBITDA predictability.
  
• Large, lumpy project revenue and a history of significant single-project losses-as seen in the adverse outcome for a major Belgian infrastructure project-highlight DEME's vulnerability to project execution risks, which can lead to sudden swings in net margins and earnings if similar incidents recur.
  
• The business is highly asset-intensive, with ongoing high capex for fleet renewal and modernization (including new vessels and Havfram integration), which constrains free cash flow and increases the risk of asset obsolescence amid rapid technological advances, placing downward pressure on earnings and long-term margins.
  
• DEME operates in a sector increasingly facing intensified global competition, particularly from Chinese EPC players capable of undercutting prices, and rising regulatory, ESG, and permitting hurdles; these long-term industry and secular trends threaten to compress future contract margins and limit sustained market share and revenue expansion.

Valuation

• The assumed bullish price target for DEME Group is €200.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of DEME Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €200.0, and the most bearish reporting a price target of just €135.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €4.8 billion, earnings will come to €359.6 million, and it would be trading on a PE ratio of 17.7x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of €129.4, the bullish analyst price target of €200.0 is 35.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.