Joensuu Biomass And Hamina Biorefinery Will Evolve Amid Risks

Key Takeaways

• Expansion in bioindustry and biorefinery operations could boost revenues and net margins through increased production and new client acquisitions.
  
• Strategic real estate partnerships and successful fundraising in renewable energy investments suggest potential for increased revenue growth and net margins.
  
• Market volatility and dependence on investment conditions pose risks to Taaleri's revenue stability and earnings predictability across its segments.

Catalysts

A publicly owned asset management holding company.

• The ramp-up of the torrefied biomass plant in Joensuu, along with securing its first test batch orders, indicates potential future growth in bioindustry operations, which could positively impact revenues and net margins as production increases.
  
• Fintoil's biorefinery in Hamina has secured new clients, which is expected to drive higher production and capacity utilization in 2025, likely contributing to increased revenues and improved net margins.
  
• The strategic partnership in the real estate business with Keva, once capital is deployed, could lead to enhanced revenue streams and potentially higher net margins due to synergies and scale benefits.
  
• Improvements in market share for Garantia, particularly in residential mortgage guarantees, suggest potential for revenue growth in the insurance segment, although the positive impact might be delayed due to the nature of IFRS accounting for insurance companies.
  
• The continued fundraising success of the SolarWind III Fund, despite a challenging market environment, suggests optimism for growth in renewable energy investments which should contribute to long-term revenue growth and potentially improved net margins as the fund expands.

Taaleri Oyj Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Taaleri Oyj's revenue will decrease by 4.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 40.0% today to 31.5% in 3 years time.
• Analysts expect earnings to reach €19.4 million (and earnings per share of €0.68) by about May 2028, down from €28.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €23.4 million in earnings, and the most bearish expecting €15.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.6x on those 2028 earnings, up from 7.2x today. This future PE is greater than the current PE for the GB Capital Markets industry at 11.6x.
• 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 6.38%, as per the Simply Wall St company report.

Taaleri Oyj Future Earnings Per Share Growth

Risks

• Market uncertainty has significantly impacted Taaleri's operations, with key financial figures showing declines such as revenue decreasing from €17 million to €8.6 million, operating profit plummeting from €9.6 million to €0.5 million, and earnings per share dropping from €0.26 to €0.02. This volatility could pose risks to long-term revenue and earnings stability.
  
• Despite the growth prospects in renewable energy and bioindustries, such as torrefied biomass plants and biorefineries, the profitability and financial development of these segments are highly dependent on market conditions, fund sizes, and project exits, which can create earnings fluctuations and reduce predictability in net margins.
  
• Garantia, a part of Taaleri, faced a revenue decline due to negative investment income from the previous strong investment results in debt and equity-related instruments. Additionally, the Finnish housing market's previous poor performance affects its earnings, creating risks to future revenue and profit recovery.
  
• The investment segment is largely dependent on investment income and subject to fair value changes and exit timing, leading to possible significant fluctuations between quarters. This uncertainty affects the revenue and net margins of Taaleri's overall financial performance.
  
• Broad economic and geopolitical factors, such as tariffs and changes in the macroeconomic environment, could indirectly impact Taaleri's investment decisions and operational cost structures, influencing both short-term and long-term earnings and revenue growth potential.

Valuation

• The analysts have a consensus price target of €9.0 for Taaleri 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 €61.6 million, earnings will come to €19.4 million, and it would be trading on a PE ratio of 15.6x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of €7.16, the analyst price target of €9.0 is 20.4% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.