New Vessels And US Expansion Will Strengthen Offshore Portfolio

Key Takeaways

• Successful delivery and installation capabilities enhance operational efficiency and position Cadeler for significant revenue and earnings growth in the offshore wind sector.
  
• Strategic diversification and strong backlog support robust future revenue prospects and increased market penetration, ensuring earnings stability and expansion.
  
• Cadeler faces operational and financial challenges due to complexities in market expansion, high operational costs, uncertain demand forecasts, and market uncertainties impacting expected revenue.

Catalysts

Operates as an offshore wind farm transportation and installation contractor in Denmark.

• The successful on-time and on-budget delivery of new vessels like Wind Peak and the first M-Class suggests increased capacity and potential revenue growth from new projects. This operational efficiency could positively impact future revenues and earnings.
  
• Cadeler's position as a leading pure-play T&I company in the growing European offshore wind market, with a robust backlog of €2.5 billion, indicates strong future revenue prospects and enhanced earnings visibility.
  
• The increasing trend of installing larger turbines at greater distances offshore plays to Cadeler's strengths, with its fleet well-suited for such installations, potentially leading to higher utilization rates and higher margins.
  
• Ongoing involvement in Operations & Maintenance (O&M) projects increases asset utilization and represents a burgeoning revenue stream, potentially enhancing net margins and earnings stability.
  
• Strategic regional diversification, especially entering the U.S. market with new vessel contracts, lays the groundwork for revenue expansion and increased market penetration, potentially leading to higher future earnings.
  

Cadeler Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cadeler's revenue will grow by 62.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 26.2% today to 46.2% in 3 years time.
• Analysts expect earnings to reach €494.5 million (and earnings per share of €1.41) by about May 2028, up from €65.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €635.1 million in earnings, and the most bearish expecting €394 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.7x on those 2028 earnings, down from 24.7x today. This future PE is lower than the current PE for the NO Construction industry at 23.6x.
• Analysts expect the number of shares outstanding to grow by 1.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Cadeler Future Earnings Per Share Growth

Risks

• Cadeler's expansion into the U.S. market is approached cautiously. While there are potential opportunities, the complexities of operating in this market could pose risks that may impact financial performance, potentially squeezing net margins.
  
• The high costs and limited availability of skilled labor could impact the scalability and profitability of Cadeler's operations as it continues to expand its fleet. This might influence the company's earnings due to increased operating expenses.
  
• The industry's high vessel newbuild costs and extended delivery times could strain Cadeler's financials if demand does not meet forecasts or if the market becomes oversaturated, potentially affecting future revenues and net margins.
  
• The anticipated high utilization of Cadeler's fleet is contingent on continued demand in the offshore wind market. Any slowdown in the market or project delays could negatively affect expected revenue streams.
  
• Cadeler highlights strong financials with an increase in backlog, but there are uncertainties in project execution and economic factors such as currency fluctuations that may affect actual income, thus impacting earnings and projected net margins.

Valuation

• The analysts have a consensus price target of NOK85.999 for Cadeler 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 €1.1 billion, earnings will come to €494.5 million, and it would be trading on a PE ratio of 6.7x, assuming you use a discount rate of 7.7%.
• Given the current share price of NOK54.1, the analyst price target of NOK86.0 is 37.1% 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.