High-tech Cables Will Drive Electrification And Digital Expansion

Key Takeaways

• Operational leadership, domestic production, and technological innovation are driving superior profitability, pricing power, and sustained market share gains ahead of current expectations.
  
• Rising demand from data centers, digital infrastructure, and renewable projects, combined with cost advantages from recycling initiatives, support long-term growth and premium margins.
  
• Exposure to cyclical end-markets, aggressive acquisition debt, intensifying competition, and rising regulatory costs threaten Prysmian's margins, profitability, and long-term revenue growth.

Catalysts

Produces, distributes, and sells power and telecom cables and systems, and related accessories under the Prysmian, Draka, and General Cable brands worldwide.

• While analysts broadly agree that margin expansion in Transmission and Power Grid will drive EBITDA growth, current results already show 17% EBITDA margins in Transmission with management targeting 18 to 20 percent by 2028, suggesting margins could exceed consensus and potentially reach the upper end or surpass current targets due to operational leadership and execution, substantially boosting profitability ahead of expectations.
  
• Analyst consensus sees strong U.S. grid demand and margin stability, but the recent introduction of 50 percent tariffs on imported copper and cable, combined with Prysmian's nearly fully domestic production, is likely to result in an even more favorable competitive environment, enabling persistent pricing power, sustained market share gains, and a structurally higher net margin profile for the U.S. business.
  
• Surging data center construction and rapid rollout of AI-driven digital infrastructure in North America-with Prysmian set to double its data center related revenue this year to above €1 billion-points to robust, multi-year top line growth and premium margins in the Digital Solutions and I&C segments as demand accelerates beyond current market forecasts.
  
• Accelerated innovation and commercialization of proprietary cable technologies-such as hollow-core fiber enabling higher-speed, low-latency connectivity for hyperscalers, and new dynamic offshore wind solutions-position Prysmian to capture outsized share of next-generation grid, telecom, and renewable project spend, which could meaningfully lift both revenue growth and margin mix through 2028.
  
• Prysmian is set to unlock further structural cost advantages and cash flow through scale-enabled recycling, achieving up to 30 to 40 percent recycled copper feedstock at Encore Wire, yielding a per-ton cost saving and ESG leadership that could drive sustained net margin accretion and support premium revenue growth through customer preference and regulatory tailwinds.

Prysmian Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Prysmian compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Prysmian's revenue will grow by 6.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.9% today to 7.2% in 3 years time.
• The bullish analysts expect earnings to reach €1.6 billion (and earnings per share of €5.88) by about August 2028, up from €749.0 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 26.8x on those 2028 earnings, down from 28.3x today. This future PE is greater than the current PE for the GB Electrical industry at 17.1x.
• Analysts expect the number of shares outstanding to grow by 2.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.95%, as per the Simply Wall St company report.

Prysmian Future Earnings Per Share Growth

Risks

• The company remains exposed to the risk of declining infrastructure stimulus and aging infrastructure in developed markets where government budget constraints could lead to reduced investments in new grid and telecom projects, ultimately putting long-term pressure on Prysmian's revenue growth and backlog.
  
• Aggressive acquisitions have increased the group's debt and financial charges, with a €1 billion hybrid bond treated partly as debt by rating agencies, which heightens pressure on the balance sheet and could erode net margins and risk-adjusted earnings if integration synergies or cash flows underperform.
  
• Price competition and commoditization are intensifying, particularly in cable products, with the company acknowledging higher competition in both North America and Europe, as well as exposure to import tariffs and global supply chain dynamics, all of which could reduce average selling prices, market share, and revenue in the long term.
  
• Prysmian's significant exposure to cyclical end-markets-including utilities, telecom, and non-residential construction-is apparent from recent softening in non-residential and automotive demand, highlighting vulnerability to prolonged industry downturns that could lead to sustained revenue and margin pressure.
  
• Increasing sustainability regulations and resource nationalism could drive up raw materials costs (especially for copper and plastics), requiring further capital spending to meet ESG and decarbonization targets, which may weigh on profitability and free cash flow over time.

Valuation

• The assumed bullish price target for Prysmian is €99.08, which represents two standard deviations above the consensus price target of €73.09. This valuation is based on what can be assumed as the expectations of Prysmian'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 €102.0, and the most bearish reporting a price target of just €35.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €22.9 billion, earnings will come to €1.6 billion, and it would be trading on a PE ratio of 26.8x, assuming you use a discount rate of 12.9%.
  
• Given the current share price of €74.0, the bullish analyst price target of €99.08 is 25.3% 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.