Cambi: waiting for big orders

Catalysts

• Industry Tailwinds: Continued global demand for wastewater treatment driven by urbanisation, water scarcity, and stricter environmental regulations. A rising focus on circular economies that value resource recovery from organic waste.
• Pricing power: The stable gross margins (mid‑50% range) over recent years highlight robust pricing power despite cost pressures.
• Recurring Revenue Opportunity: An expanding installed base (currently ~92 systems averaging roughly NOK 28–32 m per installation (best guess)) creates a steady recurring services revenue stream (roughly 3% of installed base, estimated at ~88–114 mNOK annually when including backlog conversion). This gives a cushino for the otherwise unpredictable order intake.

Assumptions

• Revenue CAGR:  
  • 3‑year: ~36–37%  
  • 5‑year: ~37–38%  
  • 10‑year (extrapolated): ~20–25%
  Over a longer horizon, the law of large numbers suggests that as the revenue base expands, the growth rate naturally moderates. Given most recent industry momentum (indicated by last years strong CAGR) but current weak order intake (lumpy order intake) and slower incremental growth at scale, a conservative 20–25% long-term CAGR is a safe and realistic assumption.
• Average Net Profit Margins:
  • Recent 3‑year average: ~8–9%
  • 5‑year average: ~7%
  • 10‑year (extrapolated): ~5–7
  Over the long term, net margins historically have been modest. However, in the last two years, margins have significantly improved—approximately 17.8% in 2023 and 14.5% in 2024—coinciding with a notable takeoff in revenues. This suggests that strong operating leverage begins to materialize once revenues exceed roughly 400–500 mNOK on a trailing twelve-month basis. That being said, given the lumpy nature of order intake, there is a possibility of revenue declines in certain periods, so margins may not consistently reach all-time highs. Nevertheless, considering the current momentum in the business, the model assumes a net profit margin of approximately 14.5% going forward.

Risks

• Scaling & Operating Leverage Risks: The recent improvement in net margins—from lower historical levels to around 17.8% in 2023 and 14.5% in 2024 — suggests that strong operating leverage kicks in above a certain revenue threshold (roughly 400–500 mNOK LTM). However, if revenue growth falters or fluctuates significantly, the anticipated scaling benefits may not fully materialize, potentially causing margins to revert to historical averages or even negative.
• Execution & Order Intake Risks: A decline or delay in new orders—especially if the current backlog fails to convert as expected—could lead to periods of lower revenue, adversely affecting margins and the stock price. Given that a key driver of the current valuation is the reported order intake, it is crucial for new orders to pick up in the coming quarters and sustain momentum for the investment thesis to fully materialize.
• Write downs: The divestment of Gronn Vekst baging facility may cause unexpected write downs if its divested a low valuation.

Valuation

• Given the strong growth prospects, it could be justified to assign a PE multiple in the range of 15x to 25x. The industry average sits at around 19.5x, and with expected growth of approximately 26%, one might argue for an even higher multiple if growth exceeds our assumptions. However, given the uncertainties — particularly the lumpy order intake and potential execution risks which the market will want a discount fore— we conservatively assign a somewhat lower multiple of 17.5x PE in the model.
• Due to uncertainties in the order outlook — such as the lumpy order intake and potential risks in converting the backlog — a risk premium of 1% has been added, hence as discount rate of 7.84 is assumed in the model.

To be on the lookout for in the upcoming Qs

• Monitor Order Intake and Backlog Conversion: Watch for signs that new orders are not picking up as expected or that conversion of the current backlog lags behind projections, which could adversely affect revenue growth and margins.
• Execution and Scaling Risks: Be alert for any operational delays or execution issues that prevent the business from achieving the necessary revenue threshold (400–500 mNOK LTM) to sustain high operating leverage, potentially causing margins to revert to historical levels.
• Divestment Write-Downs: Keep an eye on the divestment process of the Grønn Vekst bagging facility, as any unexpected write-downs or lower-than-anticipated valuations could impact overall profitability.