Buy recommendation reaffirmed (Ebioss Energy)

We have updated our model following the company's new strategy with the integration of its Chinese partner. As the growth development and international focus of the company has not changed, a solution for financial support going forward with many projects simultaneously, while avoiding shareholder dilution, is a positive for both the company and investors, even if the process pushes expected revenues further ahead in time. We maintain a positive view on the group backed by our Buy recommendation as its specialised product development and know-how gives them a technological advantage over competitors, recently confirmed by the projects signed in the UK.

Due to the push forward in time of many projects under development, we have revised downwards our top-line expectations for the years to come, mainly driven by lower revenues negatively affecting our EPS estimations. Nonetheless, a lesser need of capital for future investments implies that lower financial expenses will be incurred and this partially offsets the downward pressure at the bottom-line.

Driven by the results release and the new business plan, we have revised downwards our top-line earnings expectations, which negatively impact our SOTP valuation. The negative effect has been partially offset by a decrease in expected net debt as the lighter capital model after the agreed strategic partnership provides a better financial flexibility for the company.

Following the half-year results and the new guidance provided following the agreement with its Chinese partner, we have lowered our earnings expectations and the operating cash flow for the coming years, negatively affecting our DCF valuation. However, under the new structure with less capital required for new projects in terms of debt and investment, we have also reduced capex expectations, partially offsetting the negative effect.