Subsea 7 (Buy, TP: NOK180.00) - On track for margin expansion
The Q2 results were largely as expected, with EBITDA in line with our estimate and consensus. Working capital build continued in Q2, as communicated previously, but we expect it to start to unwind in H2, allowing for stronger free cash flow generation. Subsea 7 is still on track for strength in H2 and longer-term, as it reiterated its near-term and long-term guidance. It has also sorted out its renewables vessel scheduling related to Dogger Bank for 2023–2025, which could ease some investor concerns. As the stock is trading at a 2-year forward EV/EBITDA of 4x, we reiterate our BUY and NOK180 target price.Subsea 7 is a provider of seabed-to-surface engineering, construction and services contractor to the offshore energy industry. Co. provides products and services required for subsea field development, including project management, design and engineering, procurement, fabrication, survey, installation, and commissioning of production facilities on the seabed and the tie-back of these facilities to fixed or floating platforms or to the shore. Co. also provides products and capabilities to deliver full Life of Field services to its clients. Through its i-Tech Division, Co. provides remotely operated vehicles and tooling services to support exploration, production and drilling activities.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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