Ecoclime: Winner on district heating price hikes - ABG

’23e district heating prices raised by up to 20%...


…boosting Evertherm ROI and shortening payback


Q3 report due on Thursday, 10 November


District heating monopolies raise 2023 prices by up to 20%

More than 90% of Swedish multi-unit dwellings use district heating. The district heating market is built on regional monopolies, with providers often being state- or municipality-owned, although they can also be wholly or partly private-owned. The average Swedish district heating price has increased by 1.6% per annum over 10 years, outpacing inflation by 5.6pp cumulatively. For 2023, municipal and state-owned providers are in general limiting price increases to 2-4% despite high electricity costs. However, E.ON (100% private) and Stockholm Exergi (50% private), which together provide >20% of Sweden’s population with district heating, have announced price hikes of 8-20%. Also, privately owned Nevel AB has already raised prices by 8-9% in August in several municipalities.



Cutting Evertherm payback time by 0.7-3.0 years

Evertherm recycles up to 95% of thermal energy from wastewater, meaning less energy is needed to heat the property. As such, higher district heating prices are positive for Evertherm, as this increases the financial incentive to save energy. We calculate that for a 3,000 sqm property, a 5-25% district heating price increase would shave 0.7-3.0 years off the payback time for Evertherm (assuming 2.5% property yield).



Q3: Installation contracts continue to pressure margins

We only make minor estimate changes and include a paid earn-out for SDC Automation (partly paid with new shares). For Q3, we expect net sales of SEK 51m, up 89% y-o-y (+26% organic, +63% M&A), with continued solid Evertherm demand and sequential improvement in Smart Properties. The gross margin should remain under pressure, with Ecoclime still sitting on some fixed-price installation contracts, although product margins remain stable, according to management. Also, opex build up should continue as the company readies itself for further Evertherm growth. All in all, we estimate a gross profit of SEK 25m, for a margin of 49.8% (57.3%), and an adj. EBITDA of SEK -0.2m (2.3m).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ecoclime/Equity-research/2022/10/ecoclime---winner-on-district-heating-price-hikes/