Skip to main content

EGL to deliver 50% earnings growth in FY23e

EGL has provided a trading update for FY23e ahead of Bell Potter forecasts. The company now expects FY23e underlying EBITDA of ~$6.6m, which implies YOY earnings growth of +50% and compares to previous guidance of $5.9m (BPe prev. $6.0m). As part of the announcement EGL commented on a “particularly pleasing” 4Q23 work rate, with strong performance across ongoing services/projects and minimal contribution from the recent Airtight acquisition completed in May’23.

TAPC and EGL Energy leading the way

In our view, EGL’s trading update and strong 4Q23 exit rate suggests most if not all of the company’s segments are performing  ahead of our expectations. However, we believe commentary provided by management would look most consistent with some strong contribution out of TAPC, where EGL has recently achieved a step-up in service level revenues and has ongoing air emissions contracts with Hastings Technology Metals ($17.8m) and Covalent Lithium ($5.2m) refineries. Heading into FY24e we see pipeline opportunities emerging with an additional 5 major battery minerals processing/refinery projects ahead of their 2025-26 production dates.

In addition, we expect improved margins from EGL Energy with boiler costs such as steel, freight and valve prices having normalised from 2022 highs (EGL was adversely impacted by -$0.5m in 1H23). We also see the potential for another strong FY24e for EGL Energy following the exit of several key regional competitors.

Investment view: Maintain Buy recommendation

Our EPS changes are 8%, 3% and 1% across FY23-25e. Given the project oriented nature of two of EGL’s segments, the key unknown for us at this stage is whether an element of the company’s larger project pipeline was front ended into FY23. Whilst we await further visibility at the FY23 result, EGL continues to be one of our top picks with potential earnings and/or news flow catalysts over the next 12 months including: (1) PFAS separation plant sales; (2) conversion on a ~$115m waste pipeline; and (3) potential further air pollution control projects in battery minerals.

To read the full report click the button below.

View Detailed Report
Authored by Sam Brandwood – Analyst – at Bell Potter Securities, 17 July 2023
Important Disclaimer—This may affect your legal rights: Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. This is general investment advice only and does not constitute advice to any person.
Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended.