Clean Energy Transition And Digitalization Will Unlock Global Opportunities

Key Takeaways

• Strong project pipeline, digitalization, and premium services position Técnicas Reunidas for outperformance in revenue growth and profitability beyond current expectations.
  
• Strategic focus on energy transition and global execution capabilities enable market share gains and recurring revenues in high-value, complex infrastructure markets.
  
• Slow progress in renewables, high financing costs, and execution risks leave the company vulnerable as competitors advance more rapidly in the energy transition.

Catalysts

An engineering and construction company, designs and manages industrial plant projects worldwide.

• Analyst consensus expects strong revenue growth in 2025 propelled by major projects, but this underestimates both the visible acceleration of revenue beyond guidance-thanks to customer demands for even faster project delivery in the Middle East-and management's ambition to exceed five point two billion euros in sales and reach EBIT margins above five percent, which together could yield upside surprises on both top line and earnings.
  
• While analysts broadly expect margin improvement into 2025 and 2026, they may be underestimating the structural step-change possible from Técnicas Reunidas' deepening mix of premium, higher-margin service contracts and its advancing digitalization, which together can drive net margins and EBIT above consensus levels through both pricing power and execution efficiency.
  
• Técnicas Reunidas has a vast and fast-growing, highly diversified pipeline spanning more than sixty-six billion euros, with particularly strong momentum in North America and the Middle East-evidence that its business development has unlocked a larger long-term addressable market, likely fueling recurring revenue and backlog growth well beyond near-term projections.
  
• The company's strategic shift and growing execution in energy transition and decarbonization (including blue/green ammonia, carbon capture, and sustainable aviation fuels), supported by collaborative agreements with major financial partners such as BBVA, position it to rapidly accelerate market share and revenue streams as global regulatory and investment tailwinds intensify in clean energy.
  
• With demonstrated ability to rapidly scale and flex its global engineering capacity through Indian and European hubs, Técnicas Reunidas is uniquely positioned to capture and execute a disproportionate share of the most complex, large-scale engineering, procurement, and construction contracts globally, which will support sustained double-digit revenue growth and higher earnings quality for years ahead.

Técnicas Reunidas Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Técnicas Reunidas compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Técnicas Reunidas's revenue will grow by 8.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.0% today to 3.7% in 3 years time.
• The bullish analysts expect earnings to reach €220.9 million (and earnings per share of €3.47) by about July 2028, up from €96.6 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 11.0x on those 2028 earnings, down from 17.6x today. This future PE is lower than the current PE for the GB Energy Services industry at 16.6x.
• 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 9.18%, as per the Simply Wall St company report.

Técnicas Reunidas Future Earnings Per Share Growth

Risks

• Técnicas Reunidas remains heavily concentrated in oil, gas, and petrochemicals, with only gradual diversification into renewables and energy transition projects, leaving future revenues and earnings highly vulnerable to the global secular shift away from fossil fuels and associated long-term declines in project demand.
  
• The company acknowledges that the energy transition project pipeline is progressing slowly, with significant client delays in final investment decisions, which could prolong the time before decarbonization opportunities translate into meaningful revenue streams and weigh on overall top-line growth.
  
• Financing costs remain high, with continued reliance on an expensive hybrid loan from the Spanish government, which management characterizes as "extremely expensive" with an 8.5 percent cost, directly reducing net profits and potentially constraining future financial flexibility.
  
• Técnicas Reunidas faces persistent project execution risks-including ongoing disputes and mention of hyperinflation impacts in Argentina-that could lead to cost overruns, lower margins, and weaker investor confidence in its ability to consistently deliver profitable growth.
  
• Intensifying competition from EPC peers who are faster in their pivot to renewables and integrated digital solutions threatens Técnicas Reunidas' market share, which could put sustained pressure on future revenues and net margins if the company cannot accelerate its own transformation.

Valuation

• The assumed bullish price target for Técnicas Reunidas is €24.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Técnicas Reunidas'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 €24.0, and the most bearish reporting a price target of just €12.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €6.0 billion, earnings will come to €220.9 million, and it would be trading on a PE ratio of 11.0x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of €21.72, the bullish analyst price target of €24.0 is 9.5% 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.