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25 Apr 2024
1Q24: Another quarter of clear-cut delivery

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1Q24: Another quarter of clear-cut delivery
- Published:
25 Apr 2024 -
Author:
Thomson Daniel DT -
Pages:
12 -
What we learned from the quarter: building back trust quarter by quarter
Saipem''s 1Q result added another quarter of solid execution to the recovery story, recording a 5th consecutive quarter of y/y EBITDA growth and a 4th of positive net income. Margins in ABS reached 11.0%, the highest level since the onset of Covid, with management revising upward their revenue and EBITDA expectations for the division only a few months after the initial budget was set. With SPM disclosing that it is in advanced negotiations on two ''sizeable'' deepwater projects off West Africa and with a CCUS project in East Asia likely to be awarded in 2Q, order momentum should pick up from a somewhat subdued first quarter. Beyond 2Q, the Middle East is set to sustain momentum.
Saudi jack-up suspensions: 3 rigs impacted but financial impact substantially mitigated
SPM noted that 3 of 7 jack-ups with Aramco would be affected by the temporary suspensions in 2024, though the financial impact would be substantially mitigated through flexibility afforded by its asset-light strategy. Beyond 2024, management sees its fleet growing in the area.
How it changes our investment view: offshore better than expected
SPM and peer margin performance and positive outlook commentary in 1Q leave us increasingly optimistic on the pace of the recovery in offshore. Clear-cut results and continued solid execution should continue to rebuild market trust, with Moody''s recent credit rating upgrade a demonstration.
Changes to estimates - TP raised to EUR2.8/sh from EUR2.55; Outperform
We revise our 2024 and 2025 revenue and EBITDA estimates up by 2% and 1% respectively on ABS revenue scheduling and a 7% increase to our FY24 ABS order forecast. We raise our target price to EUR2.80 from EUR2.55 as we raise our target ''24E EV/EBITDA multiple to 5.75x from 5.5x and lower our WACC to 11.3% from 11.9% reflecting gradual de-risking of legacy backlog. We reiterate our Outperform rating.