Abu Dhabi Plant And Next-Generation Sectors Will Define Future Markets

Key Takeaways

• Diversification into high-value sectors and expansion into new geographies are strengthening margins and reducing reliance on traditional markets.
  
• New long-term contracts and completed investments are enhancing recurring revenues, profitability, and financial stability.
  
• Heavy reliance on major contracts, market uncertainty, cost risks, high debt, and slow diversification threaten future stability, margin strength, and long-term revenue growth.

Catalysts

Engages in the manufacturing and sale of stainless steel and nickel tubes in Spain and internationally.

• The ramp-up and monetization of the new Abu Dhabi plant and the transformative multi-year ADNOC contract are expected to meaningfully boost recurring revenues and EBITDA as production and deliveries accelerate through 2025–2028, leveraging Tubacex's strategic position in the global energy transition and localization of supply chains.
  
• Growing exposure and contract wins in next-generation sectors (hydrogen, nuclear, carbon capture, and aerospace), supported by significant global infrastructure investment and decarbonization initiatives, are diversifying Tubacex's end markets and improving blended net margins due to the higher-value, higher-margin product mix.
  
• Expansion into growth geographies-especially Asia, the Middle East, and the Americas-positions Tubacex to capture increasing regional demand from infrastructure buildout and energy transition projects, supporting sustainable long-term revenue growth and buffering against weakness in legacy European markets.
  
• Recurring technology licensing (e.g., Sentinel Prime connection) and long-term framework agreements with global energy majors (such as ADNOC and Petrobras) are establishing new, higher-margin, less cyclical revenue streams, expected to enhance overall profitability and recurring earnings.
  
• With working capital peaking and investment cycles (notably in Abu Dhabi) completed, Tubacex is positioned for strong deleveraging in the next quarters, reducing financial risk and supporting future earnings growth as substantial backlog is billed and converted to cash.

Tubacex Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tubacex's revenue will grow by 16.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.4% today to 6.2% in 3 years time.
• Analysts expect earnings to reach €71.8 million (and earnings per share of €0.55) by about September 2028, up from €32.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €79.7 million in earnings, and the most bearish expecting €53 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, down from 14.3x today. This future PE is lower than the current PE for the GB Metals and Mining industry at 14.4x.
• Analysts expect the number of shares outstanding to grow by 0.99% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.75%, as per the Simply Wall St company report.

Tubacex Future Earnings Per Share Growth

Risks

• Tubacex's continued reliance on major contracts and strategic customers, particularly the 10-year ADNOC agreement and substantial Petrobras contracts, creates high customer concentration risk; delays, reductions, or non-renewals in such contracts could result in significant drops in revenue and earnings.
  
• The slow pace of investment decisions and project delays across key sectors (subsea, OCTG, industrial, and especially in Europe and the US) signal persistent market uncertainty; a sustained slowdown in order intake (as noted in 0.7x book-to-bill) threatens future backlog replenishment, pressuring long-term revenue visibility and growth.
  
• Exposure to raw material price volatility, specifically nickel and other key alloys, along with significant FX risk due to increasing dollar-denominated sales, raises the potential for further margin compression or revenue volatility, undermining net margins and stable earnings.
  
• Elevated net financial debt (with a net financial debt/EBITDA ratio of 3.1, above target range) combined with high working capital demands due to large upfront investments, could restrict Tubacex's ability to invest in growth, increase sensitivity to downturns, and add financial risk should macroeconomic conditions worsen, directly impacting net profit and financial flexibility.
  
• Long-term secular trends toward decarbonization and the global shift away from fossil fuels may structurally reduce demand for oil and gas infrastructure (Tubacex's core market), risking future order volumes and revenues unless diversification into low-carbon and high-value-add sectors meaningfully accelerates; slow adoption in hydrogen and carbon capture segments prolongs this risk to revenue streams and net margins.

Valuation

• The analysts have a consensus price target of €5.4 for Tubacex based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €6.25, and the most bearish reporting a price target of just €4.8.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.2 billion, earnings will come to €71.8 million, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 11.8%.
  
• Given the current share price of €3.71, the analyst price target of €5.4 is 31.3% 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.