EPS estimates for 2019 were revised downwards according to the company’s guidance. Meanwhile, 2020 EPS saw a considerable reduction given: 1) the later-than-expected entry into operation of the Antwerp refining unit (pushed from H2 20 to H1 21) as the company aims to kick-off the technical studies in mid-2019, 2) a revision in EBITDA and gross margins expected for the Sines and Marseille refining units according to management’s guidance, and 3) a slower roll-out of the Mini-P2R units, with the company aiming to test the first prototype at a client’s facility in H1 20.

The target price saw a slight improvement given that the lower valuation on a DCF basis (mainly explained by a revision on the expected profitability of the refining units as well as a 6-month delay to the Antwerp entry into operation), was more than offset by an increased valuation on a NAV/SOTP basis; since the need for a capital increase in the near future has been discarded thanks to the €18m funding approved by the EIB earlier this year.

Our assumption for a possible capital increase in the near future has been dismissed after the approval of an €18m funding from the European Investment Bank in February 2019. The loan will provide Ecoslops with sufficient resources to fund projects in the near future. As such, the impact on the NAV/SOTP valuation from dilution stemming from a capital increase has been ruled out.

The DCF is impacted by a 6-month push-back of the Antwerp refining unit (from H2 20 to H1 21), a slower than expected roll-out of the Mini-P2R units, as well as an adjustment on our profitability assumptions for the Sines site (and expected performance of the Marseille unit) based on management’s guidance.