Decarbonization And Green Hydrogen Megaprojects Will Drive Global Energy Transition

Key Takeaways

• Early leadership in energy transition and decarbonization projects positions the company for sustained revenue growth and a strong multiyear project backlog.
  
• Expansion in high-margin services and international workforce, coupled with industry consolidation, drives improved profitability and market share gains.
  
• Heavy reliance on traditional oil and regional concentration, combined with rising costs and execution risks, could undermine future profitability and resilience amid energy sector shifts.

Catalysts

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

• Analysts broadly agree that Técnicas Reunidas' revenue growth will be robust in 2025 and 2026, but with an unprecedented €72.3 billion qualified pipeline-much of it in energy transition and international megaprojects-there is significant upside for annual revenue to consistently exceed €6 billion from 2026 onwards, well beyond current consensus.
  
• While consensus expects sequential margin improvement, the accelerating success and scale of high-margin services business-already delivering above 30 percent EBIT margins and poised for rapid expansion-suggests EBIT and net margins could surpass five percent by 2026 with further step-changes by 2028, significantly lifting earnings.
  
• Técnicas Reunidas' leadership and early-mover status in green hydrogen, ammonia, and decarbonization megaprojects positions it as a primary beneficiary of the global shift to cleaner energy, providing sustained multiyear backlog visibility and structurally higher long-term revenue growth rates.
  
• Strategic expansion of its international engineering workforce and digitalization capabilities in cost-advantaged hubs like India and the Emirates enhances execution bandwidth and cost competitiveness, setting the stage for notable improvements in operating leverage and EBITDA conversion.
  
• Ongoing industry consolidation and the rising complexity of energy infrastructure projects are likely to drive incremental market share gains for Técnicas Reunidas, as global clients increasingly favor experienced, financially strong EPC partners-providing durable tailwinds to order intake and reducing earnings volatility.

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 8.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.1% today to 3.6% in 3 years time.
• The bullish analysts expect earnings to reach €236.1 million (and earnings per share of €3.48) by about August 2028, up from €106.1 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 11.2x on those 2028 earnings, down from 15.4x today. This future PE is lower than the current PE for the GB Energy Services industry at 15.4x.
• 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 10.0%, as per the Simply Wall St company report.

Técnicas Reunidas Future Earnings Per Share Growth

Risks

• The company's continued reliance on traditional upstream and refining contracts is still dragging on profitability, as the text notes that the upstream and refining business lines are currently underperforming, which may continue to weigh on net earnings and operating margins in the future.
  
• Técnicas Reunidas' strong growth and healthy backlog are heavily concentrated in the Middle East, a region where intense competition from larger and local EPC players and price pressure could erode both revenue growth and profit margins over time.
  
• Despite highlighting energy transition and low-carbon projects like green hydrogen, the majority of the backlog and pipeline still includes significant exposure to traditional oil, gas, and petrochemical segments, making future revenues vulnerable to global decarbonization, shifting capital flows, and regulatory changes against fossil fuels.
  
• The ramp-up in workforce and engineering capacity, with a 60% increase in employees over two years, introduces substantial cost and execution risk, especially if project demand or margin realization falls short; this could constrain operating leverage and net profit if industry conditions worsen or the energy transition accelerates.
  
• While the company highlights operational improvement and risk mitigation, the persistent challenges around project execution, including potential cost overruns, delays, and pending litigation or contingent liabilities, may continue to create earnings volatility and put pressure on net margins in coming years.

Valuation

• The assumed bullish price target for Técnicas Reunidas is €25.5, 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 €25.5, and the most bearish reporting a price target of just €16.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €6.6 billion, earnings will come to €236.1 million, and it would be trading on a PE ratio of 11.2x, assuming you use a discount rate of 10.0%.
  
• Given the current share price of €20.9, the bullish analyst price target of €25.5 is 18.0% 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.