Global Renewables Surge Will Accelerate High-Voltage Grid Modernization

Key Takeaways

• NKT is poised to outpace industry expectations in revenue and margin growth through strategic capacity expansion, market share gains, and premium pricing opportunities in renewables and grid upgrades.
  
• Advanced sustainability efforts and technical leadership are likely to secure NKT favored supplier status, consolidating its position while peers struggle with rising industry barriers.
  
• Overreliance on concentrated mega-projects and exposure to aggressive competition threaten NKT's margin resilience, revenue stability, and long-term growth prospects in traditional cable markets.

Catalysts

Designs, manufactures, and installs low, medium, and high voltage power cable solutions in Denmark.

• Analyst consensus expects capacity expansions will drive steady revenue growth as the high-voltage order backlog is executed, but this likely underestimates NKT's ability to accelerate market share gains and command even higher pricing as global renewables adoption and grid upgrades surge, which could propel revenues and margins well above current forecasts.
  
• While consensus views the medium-voltage expansion and SolidAl integration as incrementally positive for revenue and margins, the true impact could be much greater, with NKT leveraging its enhanced footprint and longstanding DSO relationships to capture a disproportionate share of coming wave of European grid modernization projects, sharply boosting earnings.
  
• The industry's increasing technical and environmental requirements, coupled with rising barriers to entry, are positioning NKT to consolidate its leadership as peers struggle to keep pace, allowing NKT to sustain superior margins and stable long-term earnings as less capable rivals are marginalized.
  
• NKT's early and deep investments in decarbonized production and supply chain sustainability are likely to secure lucrative preferred-supplier status in pan-European and multinational tenders for green infrastructure, driving multiyear premium pricing and above-peer net margin expansion.
  
• As electrification trends in transport and industry accelerate, NKT's proven project execution in complex, large-scale HVDC and grid projects-combined with additional manufacturing and installation capacity coming online-could enable outsized revenue and EBITDA growth that compound well beyond investor expectations.

NKT Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on NKT compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming NKT's revenue will grow by 13.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 6.9% today to 6.5% in 3 years time.
• The bullish analysts expect earnings to reach €319.4 million (and earnings per share of €5.87) by about July 2028, up from €234.0 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 22.7x on those 2028 earnings, up from 17.6x today. This future PE is greater than the current PE for the GB Electrical industry at 22.5x.
• 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 6.67%, as per the Simply Wall St company report.

NKT Future Earnings Per Share Growth

Risks

• Exposure to increased global competition, particularly from Asian cable manufacturers offering lower price points, is already putting pressure on NKT's margins in both the power distribution and medium voltage segments, and could further erode market share and reduce revenue and earnings resilience over time.
  
• NKT's reliance on a limited pipeline of mega-projects and a concentrated order backlog (with over 85% of high voltage orders coming from European TSOs) exposes the company to revenue volatility if project awards slow, are delayed, or face cancellation, leading to lumpiness in revenue recognition and potential EPS swings.
  
• The company is currently undertaking significant capital expenditures-about €2 billion from 2025 to 2028-for capacity expansions. If global infrastructure spending slows, or if project delays occur, the resulting high fixed-cost base and operational ramp-up costs could compress net margins and impede profitability.
  
• Decarbonization trends and the adoption of alternative energy distribution models, such as microgrids or other decentralized systems, may gradually lessen the long-term demand for traditional high-voltage cable infrastructure, threatening sustained revenue growth for NKT beyond the current decade.
  
• Persistent margin pressure in construction and power grid exposed business lines, amid heightened competitive environments and subdued demand (especially in European construction markets), could translate into structurally lower profitability and impede NKT's ability to reach its long-term earnings targets.

Valuation

• The assumed bullish price target for NKT is DKK843.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of NKT'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 DKK843.0, and the most bearish reporting a price target of just DKK403.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €4.9 billion, earnings will come to €319.4 million, and it would be trading on a PE ratio of 22.7x, assuming you use a discount rate of 6.7%.
• Given the current share price of DKK575.5, the bullish analyst price target of DKK843.0 is 31.7% 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.