FREE

CENERGY | Upgrades loading

FY’26 outlook understated, with clear path for upgrades throughout the year – Following the FY’25 release, we reiterate our FY’26 adj. EBITDA estimate of €424mn, while also incorporating moderate upgrades to our mid-term forecasts, reflecting improved visibility on the Maryland addition, stronger outlook for cables projects driven by a higher-quality backlog and much-improved prospects for steel pipes. Our FY’26e adj. EBITDA estimate sits above mgmt guidance and c12% above consensus but just a tad above mgmt’s previously communicated mid-term target of €380-420mn (as discussed on pg. 3). In this context, we see clear scope for upgrades over the course of the year, consistent with mgmt’s track record of upward revisions. At the same time, we believe trading levels following the Iran conflict understate the earnings power of the core business and, in our view, offer a compelling entry point.

Capacity additions, cable margin expansion underpin c12% 4-yr adj. EBITDA CAGR – We raise our adj. EBITDA estimates for Cenergy by +3-4% over 2027-28e, now forecasting Group adj. EBITDA CAGR of c12% in 2026-29e, supported by higher-quality mix and improving margins across the 2 core businesses. For cables projects, we expect growth to be initially volume-driven given the new HV capacity but also anticipate improved pricing as the mix continues to shift towards HV contracts. For cables products, despite margins normalizing from the highs of 2023-24, we see demand remaining well supported by grid upgrades, along with scope for stronger pricing from 2028e as the Maryland plant begins to contribute more meaningfully. In steel pipes, our revised estimates reflect the sector’s improved near-term dynamics, with margins anticipated to remain elevated through 2028e, supported by favorable mix. Overall, we expect Cenergy to deliver Group adj. EBITDA margin of >17.5% from 2026e onwards, above consensus estimates for Prysmian, Nexans and NKT.

Peak capex now behind; moving into full asset base monetization – With Cenergy moving off peak investment, we model capex at €180mn in 2026e and stabilizing at €115-120mn p.a. from 2027e onwards, in line with the delivery timeline of ongoing expansion projects. We forecast net debt to remain at c0.6x EBITDA in 2026e, reflecting ongoing investment, but see this declining materially thereafter as scale benefits and efficiency gains come through. Overall, we see cash generation driving Cenergy towards a near-neutral net debt position by 2029e. Our revised calculations imply post-tax ROIC averaging 23-24% over 2026-28e (from c20% in 2022-25) underscoring CENER’s disciplined capital allocation and the strength of its order book.

Valuation – Despite CENER recovering by >15% from its March 2026 lows (vs. 25-30% bounce for Prysmian/NKT), our view remains that further upside exists, as the current valuation suggests a disconnect vs. CENER’s strong underlying fundamentals. The stock continues to trade at