EcoVadis Platinum And Green Vessel Investments Will Strengthen Future Sustainability

Key Takeaways

• Investments in green vessels and ESG initiatives aim to improve cost efficiencies and brand perception, boosting margins and competitiveness.
  
• Strategic acquisitions and focus on organic growth are set to significantly enhance future earnings and operational efficiencies.
  
• Economic challenges and high capital expenditure could strain Aspo Oyj's short-term profitability, with risks to earnings if market conditions do not improve.

Catalysts

Provides shipping services in Finland, Scandinavia, the Baltic countries, Russia, Ukraine, other CIS countries, and internationally.

• Aspo's investment in 12 new green coasters and 4 green handy vessels is expected to bring significant cost efficiencies and revenue through increased capacity and energy-efficient operations, improving future EBITDA by over €30 million annually. This will enhance net margins when these vessels are fully operational by 2029.
  
• Telko's acquisitions totaling €85-90 million in net sales (Optimol, Greenfluid, Polyma, and Swed Handling) are anticipated to contribute an impressive EBITA of approximately €6 million in the coming years, boosting earnings significantly as integration and performance improvement opportunities are realized.
  
• Leipurin's acquisitions, including Kebelco and Kartagena, are expected to bolster future earnings with an additional €0.5 million or more in EBITDA. These gains are further supported by growth opportunities in the food industry, enhancing net sales in a stable market environment.
  
• Aspo's strategic focus on organic growth and maximizing previously made investments is projected to drive EBITA up to €45 million in 2025, compared to €29.1 million in 2024. This strategic realignment is expected to positively impact earnings through improved operational efficiencies and market conditions.
  
• The ESG initiatives, such as achieving a platinum medal for EcoVadis and commitment to science-based targets, are expected to bolster Aspo's brand perception and competitiveness, potentially increasing revenue by attracting customers and investors interested in sustainable practices.

Aspo Oyj Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aspo Oyj's revenue will grow by 4.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.1% today to 4.5% in 3 years time.
• Analysts expect earnings to reach €30.4 million (and earnings per share of €0.93) by about March 2028, up from €6.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €39.2 million in earnings, and the most bearish expecting €23.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.9x on those 2028 earnings, down from 25.4x today. This future PE is lower than the current PE for the GB Industrials industry at 25.0x.
• 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 9.08%, as per the Simply Wall St company report.

Aspo Oyj Future Earnings Per Share Growth

Risks

• Softer-than-expected market conditions for ESL Shipping, including lower contractual volumes and weak spot market pricing, could negatively impact net sales and profitability in the short term.
  
• Telko's earnings improvement was largely through acquisitions, and poor macroeconomic conditions, especially in Germany, could hinder future organic growth and revenue.
  
• Leipurin is facing challenges with declining volumes in low-margin categories due to a shift towards value-added products, which may limit overall sales growth and pressure on net margins.
  
• High capital expenditure commitments related to ESG-driven investments, such as the green coaster and green handy vessels, could strain free cash flow and delay profitability improvements if market conditions do not improve as expected.
  
• The reliance on future economic recovery and successful performance improvement measures to reach EBITA targets suggests there is risk if economic conditions remain stagnant or deteriorate, impacting overall earnings.

Valuation

• The analysts have a consensus price target of €6.0 for Aspo Oyj based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €677.3 million, earnings will come to €30.4 million, and it would be trading on a PE ratio of 7.9x, assuming you use a discount rate of 9.1%.
• Given the current share price of €5.18, the analyst price target of €6.0 is 13.7% 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.