European EV Adoption And Higher Margins Will Drive Stronger Long-Term Earnings

Catalysts

About Zaptec

Zaptec develops and supplies smart EV charging solutions for residential and commercial customers across Europe.

What are the underlying business or industry changes driving this perspective?

• Accelerating adoption of plug-in vehicles across Europe, highlighted by a 36 percent quarterly increase and 57 percent growth in Germany, expands the addressable market for chargers and supports sustained double digit revenue growth.
• Record installation volumes in September and October, with more than 25,000 chargers installed in October and production capacity ready to scale from 6,000 to 7,000 units per month, should enhance operating leverage and boost EBITDA and earnings.
• Strengthening positions in core Nordic markets, including revenue growth of 33 percent in Norway, 14 percent in Denmark and 11 percent in Sweden, provide a high margin base that can support stable or improving net margins as international expansion accelerates.
• Expansion in major European markets such as Benelux, the U.K., Germany and France with 54 percent growth, combined with additional sales resources and product features, is likely to drive faster top line growth and lift long term earnings power from 2026 onward.
• Ongoing mix shift toward newer products like Zaptec Go 2 and Pro, alongside targeted supply chain improvements, is expected to raise gross margins above the current 39 percent level and translate into higher EBITDA and net profit over time.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Zaptec's revenue will grow by 15.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.7% today to 7.9% in 3 years time.
• Analysts expect earnings to reach NOK 171.1 million (and earnings per share of NOK 1.95) by about December 2028, up from NOK 38.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 19.8x on those 2028 earnings, down from 53.5x today. This future PE is lower than the current PE for the NO Electrical industry at 53.5x.
• Analysts expect the number of shares outstanding to decline by 1.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.26%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Zaptec's growth is heavily tied to continued strong EV adoption in Europe. If macroeconomic pressures, reduced subsidies or changing regulation slow plug in vehicle sales over the long term, demand for home and commercial chargers could weaken and reduce revenue growth and earnings potential.
• The company is building capacity and increasing sales resources to accelerate expansion in major European markets. However, if competition intensifies or Zaptec fails to gain sufficient share in Benelux, the U.K., Germany and France, utilization of this capacity could remain suboptimal and limit operating leverage, pressuring net margins and long term earnings.
• Management is counting on higher margin products like Zaptec Go 2 and Pro to lift profitability. Any delays in adoption, pricing pressure from rivals or cost inflation in the supply chain could prevent gross margin from rising above the current 39 percent level and restrict future EBITDA and net profit expansion.
• Seasonality in installations and order intake, combined with the need to carefully manage inventory after a prior market softening, creates execution risk if demand patterns shift unexpectedly. This could lead to renewed inventory build ups or discounting that hurt cash flow, gross margins and earnings stability over time.
• Ongoing investments in innovation, brand campaigns and share based bonus programs support growth but also add to OpEx. If revenue growth decelerates from current double digit levels while these costs remain elevated, EBITDA margins could stagnate or decline and undermine the thesis of steadily improving profitability and share price appreciation.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of NOK32.0 for Zaptec based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be NOK2.2 billion, earnings will come to NOK171.1 million, and it would be trading on a PE ratio of 19.8x, assuming you use a discount rate of 8.3%.
  
• Given the current share price of NOK23.25, the analyst price target of NOK32.0 is 27.3% 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.