S92: Elevated Cost Savings Dependence Will Likely Constrain Future Order Momentum

Analysts have increased their price target for SMA Solar Technology to EUR 39 from EUR 22, citing expectations for rising profitability driven by ongoing cost savings and sustained, elevated large-scale order intake.

Analyst Commentary

Following the recent target price increase, Street research highlights a more constructive stance on SMA Solar Technology, driven by improving fundamentals and clearer visibility on future earnings power.

Bullish Takeaways

• Bullish analysts point to the significant step up in the target price as evidence that the company is entering a higher profitability phase, supported by an already active cost savings program.
• Robust and sustained large scale order intake is seen as underpinning medium term revenue growth, improving operating leverage and supporting the higher valuation.
• Expectations for solid near term quarterly results, backed by strong orders, are viewed as a catalyst for further multiple expansion if execution remains consistent.
• The upgrade from a more neutral stance to a positive rating signals growing confidence that margin improvement and cash generation can outpace prior forecasts.

Bearish Takeaways

• Bearish analysts caution that the recent strength in orders may prove short lived, particularly given rising policy and demand uncertainty in key markets such as the U.S.
• There is concern that the current valuation already embeds a sizable portion of the anticipated margin expansion, leaving less room for error on execution.
• Questions remain around the durability of the cost savings program and whether incremental efficiencies can be sustained as volumes normalize.
• Any slowdown in large scale project activity or delays in the order pipeline could quickly pressure earnings visibility and challenge the upgraded target price.

What's in the News

• SMA Solar Technology issued earnings guidance for fiscal 2025, forecasting sales between €1,450 million and €1,500 million, slightly below the €1,530.0 million expected for 2024 (company guidance).

Valuation Changes

• The fair value estimate remains unchanged at €23.60 per share, indicating no revision to the intrinsic value assessment despite the higher target price.
• The discount rate has risen slightly from 7.14 percent to 7.26 percent, reflecting a modestly higher assumed cost of capital or risk profile.
• Revenue growth is effectively unchanged at around 1.69 percent, suggesting stable expectations for long term top line expansion.
• The net profit margin is broadly stable at about 7.79 percent, indicating no material shift in the long term profitability outlook.
• The future P/E has increased marginally from 7.51x to 7.53x, implying a slightly higher multiple applied to forward earnings in the valuation model.