Global Demand And Decarbonization Will Unlock New LNG Opportunities

Key Takeaways

• Expected contract wins, rising fleet bookings, and global energy infrastructure demand position Saipem for superior, sustained top-line growth and margin expansion versus peers.
  
• Early leadership in energy transition markets and an asset-light strategy give Saipem operational flexibility and potential for outsize profitability as industry trends accelerate.
  
• Continued dependence on traditional oil and gas, combined with execution risks, elevated competition, and mounting ESG challenges, threatens sustainable profitability and future growth prospects.

Catalysts

Provides energy and infrastructure solutions worldwide.

• Analyst consensus views the backlog as providing excellent revenue visibility into 2025 and 2026, but this likely understates the potential for multi-year order momentum-management is signaling imminent major contract wins and rising fleet bookings into 2027 and 2028, which could drive an even higher sustained top-line growth trajectory.
  
• Analysts broadly see Saipem's energy transition pivot as supporting incremental revenue growth, but the pace and scale are likely underestimated; early leadership in CCUS, biorefining, and engineering services, along with landmark multi-billion euro wins, position Saipem for first-mover advantage and outsize margin expansion as regulatory and customer momentum around decarbonization accelerates through this decade.
  
• The imminent Mozambique LNG restart-where Saipem claims €3 billion in backlog exposure-combined with deepening exposure to global gas infrastructure, can trigger a sharp step-change in both revenues and EBITDA, as energy security and LNG expansion rapidly accelerate across Africa and other growth markets.
  
• Saipem's asset-light strategy in drilling and marine services provides unique operational agility, enabling the company to maximize fleet utilization and margin resilience throughout industry cycles, ultimately supporting structurally higher EBIT and free cash flow over time compared to peers tied to heavy owned-assets.
  
• The accelerating demand for energy infrastructure upgrades worldwide, from aging offshore fields to long-distance gas pipelines and renewable mega-projects, coupled with Saipem's unmatched technical capabilities and capital-light bidding for €53 billion in new tenders, sets the stage for a multi-year uplift in both order intake and structurally higher EBITDA margins.

Saipem Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Saipem compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Saipem's revenue will grow by 2.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.1% today to 5.0% in 3 years time.
• The bullish analysts expect earnings to reach €834.4 million (and earnings per share of €0.42) by about August 2028, up from €328.0 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 11.4x on those 2028 earnings, down from 13.6x today. This future PE is lower than the current PE for the GB Energy Services industry at 13.6x.
• Analysts expect the number of shares outstanding to decline by 0.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.9%, as per the Simply Wall St company report.

Saipem Future Earnings Per Share Growth

Risks

• Saipem's heavy reliance on conventional oil and gas infrastructure exposes it to long-term risks from the global energy transition and accelerating decarbonization, which could shrink the addressable market and reduce potential for future revenue growth as capital increasingly shifts to renewable energy projects.
  
• Intensifying competition in core markets, including Brazil and the Middle East, combined with pressure from lower-cost Asian EPC contractors, threatens ongoing margin compression and could erode net earnings over time.
  
• Persistent high working capital requirements, combined with exposure to project delays, terminations, or client suspensions like those experienced with Aramco and Thaioil, increase volatility in net earnings and cash flow, potentially straining liquidity in less favorable industry cycles.
  
• Recurrent large provisions for losses on legacy fixed-price contracts, which continue to impact EBITDA and EBIT, indicate ongoing execution and project risk that could result in further write-downs or impairments and negatively affect shareholder equity.
  
• Heightened ESG scrutiny and stricter regulatory environments may raise execution costs, complicate financing for hydrocarbon projects, and reduce returns on invested capital, undermining potential for margin expansion and putting downward pressure on future profitability.

Valuation

• The assumed bullish price target for Saipem is €3.54, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Saipem'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 €3.54, and the most bearish reporting a price target of just €2.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €16.6 billion, earnings will come to €834.4 million, and it would be trading on a PE ratio of 11.4x, assuming you use a discount rate of 11.9%.
• Given the current share price of €2.28, the bullish analyst price target of €3.54 is 35.6% 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.