Equity Research
Technip Energies : FY’25 guidance 3% below consensus and updated medium-term outlook ahead of CMD
November 21, 2024
Technip Energies : FY’25 guidance 3% below consensus and updated medium-term outlook ahead of CMD
Technip Energies : FY’25 guidance 3% below consensus and updated medium-term outlook ahead of CMD
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21 November 2024

Technip Energies

FY’25 guidance 3% below consensus and updated medium-term outlook ahead of CMD

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Neutral

TE.PA, TE FP

Price (20 Nov 24):€24.40

Price Target (Dec-25):€28.00

Style Exposure

Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.

Our Take: This morning Technip Energies released a statement outlining its updated medium-term guidance ahead of its CMD today (followed online here). For FY’25, the midpoint group revenue guidance is €7.3bn (Cons €7.4bn, JPMe €7.8bn), EBITDA ~€640m ( 3% below Cons. €663m, JPMe €708m). In addition, the 2028 financial framework is for Projects Delivery revenue >€6bn, EBITDA margin ~8.5%; TPS revenue >€2.6bn, EBITDA margin ~14.5%; Corporate costs €60m. The group has a commercial pipeline of >€75bn, which management expects to underpin its new medium-term outlook. In addition, FCF conversion from EBITDA is expected to be 70-85%; 2024-2028 cumulative FCF of €2.2-2.6bn (JPMe €2.5bn). This its high cash generation and>€1 billion of available firepower is expected to support future dividend growth (Dividend payout25-35% of FCF excl. WC and post leases) and allow the group to deploy capital selectively on value accretive M&A. While the outlook for FY’25 is slightly below consensus we expect a positive reaction to the solid medium term outlook, especially for TPS (and await more detail at the CMD).

  • 2025 Guidance: Midpoint group revenues €7.3bn (Cons €7.4bn, JPMe €7.8bn), EBITDA €640m (Cons. €663m, JPMe €708m). Segment split: Projects Delivery revenue €5-5.4bn (JPMe €5.5bn), EBITDA margin 8% (JPMe 8.6%); TPS revenue €2-2.2bn (JPMe €2.3bn), EBITDA margin ~13.5% (12.1%); Corporate costs €50-60m (JPMe €45m).
  • 2028 Framework: Projects Delivery revenue >€6bn, EBITDA margin ~8.5%; TPS revenue >€2.6bn, EBITDA margin ~14.5%; Corporate costs €60m.
  • FCF outlook: FCF conversion from EBITDA expected 70-85%; 2024-2028 cumulative FCF of €2.2-2.6bn (JPMe €2.5bn).
  • Capital allocation priorities:1) Dividend payout 25-35% of FCF excl. WC and post leases; 2) Value accretive M&A in TPS (e.g. Reju)
  • Commercial pipeline >€75bn through the end of 2026.

Price Performance

YTD 1m 3m 12m
Abs 15.3% 18.7% 18.3% 14.2%
Rel 19.8% 18.7% 22.1% 19.5%

Company Data

Shares O/S (mn) 180
52-week range (€) 25.78-18.33
Market cap ($ mn) 4,648.36
Exchange rate 0.94
Free float (%) 70.4%
3M ADV (mn) 0.34
3M ADV ($ mn) 8.0
Volatility (90 Day) 36
Index SXEP Index
BBG ANR (Buy | Hold | Sell) 12|2|1

Key Metrics (FYE Dec)

€ in millions FY23A FY24E FY25E FY26E
Financial Estimates
Revenue 6,015 6,950 7,800 8,099
Adj. EBITDA 494 612 708 753
Adj. EBIT 400 496 592 636
Adj. net income 294 373 434 464
Adj. EPS 1.63 2.12 2.47 2.64
BBG EPS 1.76 2.12 2.39 2.58
Cashflow from operations 261 905 872 643
FCFF 213 831 789 557
Margins and Growth
Revenue Growth Y/Y (%) (6.4%) 15.6% 12.2% 3.8%
EBITDA margin 8.2% 8.8% 9.1% 9.3%
EBITDA Growth Y/Y (%) (11.6%) 23.9% 15.7% 6.3%
EBIT margin 6.7% 7.1% 7.6% 7.9%
Net margin 4.9% 5.4% 5.6% 5.7%
Adj. EPS growth (8.1%) 30.1% 16.4% 6.8%
Ratios
Adj. tax rate 29.9% 32.0% 32.0% 32.0%
Interest cover - - - -
Net debt/Equity NM NM NM NM
Net debt/EBITDA NM NM NM NM
ROCE 10.9% 12.3% 13.7% 13.3%
ROE 16.0% 18.7% 19.8% 18.6%
Valuation
FCFF yield 4.8% 19.4% 18.4% 13.0%
Dividend yield 2.1% 2.4% 2.6% 3.0%
EV/Revenue 0.6 0.5 0.4 0.3
EV/EBITDA 6.8 5.8 4.2 3.7
Adj. P/E 15.0 11.5 9.9 9.2

Summary Investment Thesis and Valuation

Investment Thesis

Technip Energies is an Engineering and Technology Company spun out of TechnipFMC in 2021. The company has significant market share in the engineering, procurement and construction (EPC) of large-scale LNG plants, downstream facilities and offshore installations. We see scope to grow its offering in Renewables and the Energy transition as it pivots with its customers to a low-carbon future, however we see short term headwinds given the increasingly tough backdrop for the roll out of renewables energy. We also see a temporary contraction in group margins as the group executes on its large backlog and early-stage milestones recognise a lower average margin. We rate the shares Neutral.

Valuation

Our Dec-25 price target is based on the average of our estimates for: 1) NPV, using 10.5% WACC and 1.0% TGR from 2029E; 2) our 2025E EV/EBITDA at 5.9x; and 3) our 2025E P/E at 10x. Our target multiples are dictated by factors such as the point in the cycle and the risk of earnings revisions and the growth outlook.

Performance Drivers

Source: J.P. Morgan Quantitative and Derivatives Strategy for Performance Drivers; company data, Bloomberg Finance L.P. and J.P. Morgan estimates for all other tables. Note: Price history may not be complete or exact.

Investment Thesis, Valuation and Risks

Technip Energies (Neutral; Price Target: €28.00)

Investment Thesis

Technip Energies is an Engineering and Technology Company spun out of TechnipFMC in 2021. The company has significant market share in the engineering, procurement and construction (EPC) of large-scale LNG plants, downstream facilities and offshore installations. We see scope to grow its offering in Renewables and the Energy transition as it pivots with its customers to a low-carbon future, however we see short term headwinds given the increasingly tough backdrop for the roll out of renewables energy. We also see a temporary contraction in group margins as the group executes on its large backlog and early-stage milestones recognise a lower average margin. We rate the shares Neutral.

Valuation

Our Dec-25 price target is based on the average of our estimates for: 1) NPV, using 10.5% WACC and 1.0% TGR from 2029E; 2) our 2025E EV/EBITDA at 6.0x; and 3) our 2025E P/E at 10x. Our target multiples are dictated by factors such as the point in the cycle and the risk of earnings revisions and the growth outlook.

Risks to Rating and Price Target

  • Order intake: If order intake assumptions miss our expectations, we may have to revise our forecasts lower.
  • Execution risk: We do not take into account execution issues in our modelling. We assume that, on average, projects are delivered as planned. Variance from this can have an impact on financial results.
  • Commodity cycle: While TE’s portfolio is gas and downstream rather than oil, a downturn in the Oil & Gas industry can reduce investment level of TE customers.
Technip Energies: Summary of Financials
Income Statement - Annual FY23A FY24E FY25E FY26E FY27E
Revenue 6,015 6,950 7,800 8,099 -
SG&A - - - - -
Adj. EBITDAX 494 612 708 753 -
Exploration expense - - - - -
Adj. EBITDA 494 612 708 753 -
D&A (94) (117) (117) (117) -
Adj. EBIT 400 496 592 636 -
Net interest 86 53 47 45 -
Adj. PBT 487 549 639 681 -
Tax (145) (176) (204) (218) -
Minority interest (47) 0 0 1 -
Adj. Net Income 294 373 434 464 -
           
Reported EPS 1.63 2.12 2.47 2.64 -
Adj. EPS 1.63 2.12 2.47 2.64 -
y/y Growth (8.1%) 30.1% 16.4% 6.8% -
DPS 0.52 0.57 0.64 0.74 -
Payout ratio 32.1% 27.1% 25.8% 28.1% -
Shares outstanding 180 176 176 176 -
Balance Sheet FY23A FY24E FY25E FY26E FY27E
Cash and cash equivalents 3,569 3,760 4,319 4,566 -
Accounts receivable 1,624 1,556 1,917 1,826 -
Inventories 0 0 0 0 -
Other current assets 748 670 872 807 -
Current assets 5,941 5,986 7,108 7,199 -
PP&E 117 117 117 117 -
LT investments - - - - -
Other non current assets 529 591 579 568 -
Total assets 8,802 8,910 10,021 10,100 -
           
Short term borrowings 124 124 124 124 -
Payables 1,507 1,538 1,982 1,816 -
Other short term liabilities 4,151 4,101 4,451 4,432 -
Current liabilities 5,782 5,763 6,557 6,372 -
Long-term debt 637 618 618 618 -
Other long term liabilities 1,071 1,114 1,102 1,090 -
Total liabilities 6,853 6,877 7,659 7,462 -
Shareholders' equity 1,949 2,034 2,362 2,638 -
Minority interests - - - - -
Total liabilities & equity 8,802 8,910 10,021 10,100 -
BVPS - - - - -
y/y Growth - - - - -
Net debt/(cash) (2,808) (3,018) (3,577) (3,824) -
           
           
           
           
           
           
Cash Flow Statement FY23A FY24E FY25E FY26E FY27E  
Cash flow from operating activities 261 905 872 643 -  
o/w Depreciation & amortization 153 162 162 162 -  
o/w Changes in working capital (293) 325 231 (29) -  
             
Cash flow from investing activities (108) (75) (83) (86) -  
o/w Capital expenditure (48) (75) (83) (86) -  
as % of sales 0.8% 1.1% 1.1% 1.1% -  
             
Cash flow from financing activities (227) (303) (214) (232) -  
o/w Dividends paid (91) (101) (112) (130) -  
o/w Net debt issued/(repaid) 0 0 0 0 -  
             
Net change in cash (132) 528 575 325 -  
             
Adj. Free cash flow to firm 213 831 789 557 -  
y/y Growth (3.9%) 290.6% (5.0%) (29.4%) -  
             
             
             
Ratio Analysis FY23A FY24E FY25E FY26E FY27E  
ROE 16.0% 18.7% 19.8% 18.6% -  
ROA 3.3% 4.2% 4.6% 4.6% -  
ROCE 10.9% 12.3% 13.7% 13.3% -  
Net debt/equity NM NM NM NM -  
Net debt/capital NM NM NM NM -  
EBITDA margin 8.2% 8.8% 9.1% 9.3% -  
EBITDAX margin 8.2% 8.8% 9.1% 9.3% -  
P/E (x) 15.0 11.5 9.9 9.2 -  
EV/DACF (x) - - - - -  
EV/EBITDA(x) 6.8 5.8 4.2 3.7 -  
EV/EBITDAX (x) 6.8 5.8 4.2 3.7 -  
EV/Proved Reserves (boe) - - - - -  
             
Dividend yield 2.1% 2.4% 2.6% 3.0% -  
FCFF yield 4.8% 19.4% 18.4% 13.0% -  
Tax rate 29.9% 32.0% 32.0% 32.0% -  
             
CFFO Ex WC - - - - -  
CFFO Ex WC per share - - - - -  
Sector data FY23A FY24E FY25E FY26E FY27E  
Natural gas price - $/mcf - - - - -  
Brent Crude Price ($/bbl) - - - - -  
Daily production (mboed) - - - - -  
y/y Growth - - - - -  
Daily oil production (mbblpd) - - - - -  
Daily gas production (mmcfpd) - - - - -  
Total Production (mmboe) - - - - -  
Proved reserves (mmboe) - - - - -  
Core NAV        
Source: Company reports and J.P. Morgan estimates.
Note: € in millions (except per-share data).Fiscal year ends Dec. o/w - out of which


​

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Important Disclosures

  • Market Maker/ Liquidity Provider: J.P. Morgan is a market maker and/or liquidity provider in the financial instruments of/related to Technip Energies.
  • Client: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients: Technip Energies.
  • Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients, and the services provided were non-investment-banking, securities-related: Technip Energies.
  • Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients, and the services provided were non-securities-related: Technip Energies.
  • Potential Investment Banking Compensation: J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Technip Energies.
  • Non-Investment Banking Compensation Received: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Technip Energies.
  • Debt Position: J.P. Morgan may hold a position in the debt securities of Technip Energies, if any.

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Date Rating Price (€) Price Target (€)
01-Mar-22 OW 10.09 13.2
04-Mar-22 OW 10.00 14.7
23-May-22 OW 11.76 16.2
13-Jul-22 OW 11.24 15.5
28-Jul-22 OW 10.44 15.3
21-Oct-22 OW 12.88 15.5
02-Dec-22 OW 15.16 18.5
26-Jan-23 OW 16.96 18.7
24-Mar-23 N 20.68 20.4
19-May-23 NR 19.54 --
03-Oct-23 OW 23.01 28
01-Mar-24 OW 20.13 27
11-Apr-24 N 23.16 26
01-Nov-24 N 22.84 28

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

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Coverage Universe: Somerville, Kate : Aker BP (AKERBP.OL), Aker Solutions (AKES.OL), EnQuest (ENQ.L), Petrofac (PFC.L), Saipem (SPMI.MI), Subsea 7 (SUBC.OL), Technip Energies (TE.PA), Tullow Oil (TLW.L), Vår Energi (VAR.OL), Wood Group (WG.L)

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Completed 21 Nov 2024 07:32 AM GMTDisseminated 21 Nov 2024 07:32 AM GMT