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Investing.com -- UBS has begun coverage of Saipem with a Buy rating and a €3 price target, implying around 23% upside, arguing that the market is overlooking the group’s “underappreciated turnaround potential.”
Saipem shares rose 2.6% in Milan as of 10:05 GMT.
The bank’s analysts highlighted Saipem’s progress since its 2022 reset, including a cleaned-up backlog, management changes, and improved contract quality.
The record-high backlog achieved in 2024 provides strong visibility on revenues through 2026, with UBS forecasting EBITDA to rise to €2 billion by 2028.
Analysts expect margins to expand by roughly 400 basis points from 2024 levels, returning to pre-COVID performance.
“The stock continues to be a crowded short within the sector,” a team led by Anna Kishmariya wrote, but they see the earnings recovery as not fully reflected in market pricing.
Analysts said that Saipem’s current valuation discount to peers has widened materially this year, in part due to litigation over the Thai Oil project. While acknowledging those risks, they believe the gap is unjustified and that ongoing delivery on targets and accelerating order intake should help close it.
UBS values the stock on a blended basis of forward earnings and discounted cash flow (DCF), using a 9x forward P/E multiple and an 11.6% Weighted Average Cost of Capital (WACC).
At the €3 target, Saipem would trade at 3.8x 2026 EV/EBITDA, consistent with its three-year average discount.
The analysts also pointed to potential upside from the planned merger with Subsea7, expected to close in the second half of 2026 pending regulatory approvals.
They view the deal as strategically compelling, creating “a global leader of the offshore market with a unique position in fast growing subsea installations and SURF segments.”
UBS considers the company’s €300 million synergy target as conservative and expects the market to start pricing in the deal closer to completion.
The bank forecasts Saipem’s revenues at €15 billion in 2025 and €15.3 billion in 2026, with net profit rising from €432 million in 2025 to €564 million in 2026.
The analysts also highlighted a stronger balance sheet, with net debt reduced to just €0.2 billion in the first half of 2025, and a goal of securing an investment-grade credit rating in the medium term.