Digitalization And Renewables Will Transform Offshore Infrastructure

Key Takeaways

• Expansion of autonomous vessels and digital services positions the company for long-term growth and improved margins as offshore infrastructure shifts toward automation and renewables.
  
• Emphasis on environmentally friendly operations and quality contracts enhances resilience, regulatory appeal, and potential for higher-value project wins in a diversifying market.
  
• Heavy reliance on Oil & Gas and high CapEx amid uncertain backlog and unproven new services heighten revenue volatility, margin pressure, and execution risk.

Catalysts

Provides subsea services in Norway and internationally.

• Deployment and rapid scaling of the Reach Remote autonomous/robotic vessel fleet, with proven pilot success and further units to be added, positions the company to benefit from the accelerating shift towards automation and digitalization in offshore infrastructure monitoring, driving long-term margin expansion and improved recurring earnings.
  
• Record-high project activity, strong backlog (NOK 1.3 billion), and expanding global footprint highlight robust demand for subsea inspection, maintenance, and repair—supported by the ongoing buildout of offshore wind, power cables, and other renewable energy infrastructure—which is likely to drive sustained top-line growth as the addressable market expands.
  
• Significant investments in in-house digital platforms (Reach Horizon) and data-driven services are expected to improve operational efficiency, enable new service offerings, and capture value from the maritime and offshore sector’s need for advanced monitoring, supporting both revenue and margin growth.
  
• Successful integration of environmentally friendly dual-fuel vessels and remote operations enhances Reach Subsea’s ESG profile and regulatory compliance, making the company a more attractive partner for energy transition projects, potentially leading to higher contract wins and improved backlog quality.
  
• Strategic focus on quality order book and selective pursuit of long-term, higher-margin contracts—rather than maximizing backlog size alone—positions the company to maintain strong net margins, earnings stability, and resilience as offshore energy markets become less cyclical and more diversified.

Reach Subsea Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Reach Subsea's revenue will grow by 9.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.0% today to 15.0% in 3 years time.
• Analysts expect earnings to reach NOK 553.0 million (and earnings per share of NOK 1.55) by about July 2028, up from NOK 255.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.1x on those 2028 earnings, down from 10.0x today. This future PE is greater than the current PE for the NO Energy Services industry at 7.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.69%, as per the Simply Wall St company report.

Reach Subsea Future Earnings Per Share Growth

Risks

• Reach Subsea’s current revenue mix is still heavily dependent on Oil & Gas sector projects (63% of turnover in Q1), making the company vulnerable to the long-term global shift towards renewables and decarbonization, which may reduce future revenue and compress demand for its legacy services.
  
• Despite strong growth and high utilization, the flat year-on-year order backlog signals that near-term revenue visibility could be limited, increasing inherent revenue volatility and potential downside risk in earnings if new project inflow slows.
  
• Ongoing heavy investments in new vessel assets (Reach Remote 2–4, Viking Vigor, Newbuild 76) result in significant CapEx requirements, which could strain cash flow and increase net debt in adverse market conditions, potentially pressuring future net margins and limiting flexibility for shareholder returns.
  
• The company’s growth expectations are built on success with new robotic and remote operation services but have not yet proven long-term commercial scalability or sustained margin profile in these newer business segments, increasing execution risk for both revenue diversification and profit stability.
  
• Long-term industry trends toward automation, vessel oversupply, and intense competition may lead to margin pressure, particularly if Reach Subsea cannot differentiate its offering or faces reduced day rates, ultimately threatening both revenue growth and net margin expansion.

Valuation

• The analysts have a consensus price target of NOK10.044 for Reach Subsea 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 NOK3.7 billion, earnings will come to NOK553.0 million, and it would be trading on a PE ratio of 9.1x, assuming you use a discount rate of 7.7%.
• Given the current share price of NOK7.8, the analyst price target of NOK10.04 is 22.3% 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.