14 mars 2022

Ecoclime – Cutting costs with clean energy

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Facilitating major energy and cost savings

Ecoclime is a growing and profitable property technology company with exposure to structural sustainability trends such as improving properties’ energy efficiency and indoor climate. The company’s products strike a balance between environmental and financial incentives for property owners, allowing them to reduce energy usage and thereby cut costs. In our view, the main organic growth driver will be higher sales of Evertherm, a system that recycles thermal energy from wastewater and re-routes it back into the property. The company’s other products include draft-free and silent ventilation panels that aim to replace conventional cooling beams, software that lets property owners monitor energy and air flows throughout the building and energy-efficient LED lighting products.

Scale effect and product mix to drive 44% adj. EBITDA CAGR

We expect ’22e-’24e net sales and adj. EBITDA CAGRs of 22% and 44%, respectively. Our estimates include adj. EBITDA margin expansion to 20% by ’24e, which we argue will stem from: 1) a favourable product mix as high-margin Evertherm sales come to make up a larger share, and 2) scaling on fixed costs as the company plans to significantly boost production capacity in the coming years by expanding its factory in Vilhelmina. In addition to organic growth, M&A has been a key pillar of the growth strategy and Ecoclime has already added ~40% to sales and ~30% to adj. EBITDA on a pro forma basis in ’22 through the acquisition of Miljöbelysning. Furthermore, the company has signed LOIs to complete two more acquisitions.

Fair value range implies 8-14x ’23e EV/EBITDA (adj.)

Using a peer valuation, an FCF yield valuation and a DCF model, all yielding similar results, we derive a fair value range of SEK 12-20 per share, corresponding to a ’23e EV/EBITDA (adj.) range of 8-14x (12-23x for ’22e). By conducting two M&A scenarios, we conclude that further value-accretive M&A could increase the value range to SEK 23-34. The main risks to our estimates are increasing competition, M&A execution, and poorly executed expansion.

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