Nexans SA (NEX.PA) is a French multinational company specializing in advanced cabling and electrification solutions. As the world accelerates its energy transition, the need for robust, high-capacity electrical grids has never been greater. Nexans is uniquely positioned to capitalize on this trend, with a strong order backlog, improving operational efficiency, and a clear strategy to expand its high-margin electrification business.
Investment Thesis
Nexans is transitioning from a commodity cable producer to a high-value electrification solutions provider. The company’s ‘New Nexans’ strategy focuses on profitable growth in electrification, driven by grid modernization, renewable energy connections, and data center infrastructure. With a record order backlog of over €5 billion and a target to double its electrification revenue by 2027, Nexans offers a rare combination of secular growth, margin expansion, and free cash flow generation.
12-Month Catalysts
- Order Backlog Conversion: Nexans has a record order backlog, particularly in submarine cables for offshore wind and interconnectors. Conversion of this backlog into revenue will drive strong top-line growth and margin expansion.
- Margin Improvement: The company’s focus on high-margin electrification projects and cost optimization is expected to drive EBITDA margin expansion from ~10% in 2024 to 12-13% by 2026, with near-term catalysts from H2 2025 results.
- Free Cash Flow Inflection: After a period of heavy capex for capacity expansion, Nexans is expected to generate significant free cash flow from 2025 onwards, enabling debt reduction and potential shareholder returns.
Key Risks
- Project Execution Risk: Large-scale submarine cable projects are complex and subject to delays, cost overruns, and technical challenges. Any significant project delays could impact revenue and margins.
- Commodity Price Volatility: While Nexans is reducing its exposure to commodity cables, copper and aluminum prices still impact its raw material costs. A sharp rise in metal prices could pressure margins if not passed through to customers.
Valuation Summary
Nexans trades at approximately 12x forward EV/EBITDA, a discount to peers like Prysmian (15x) and NKT (14x). Given its superior growth profile and margin expansion trajectory, we see potential for multiple expansion to 14-15x, implying 20-30% upside over 12 months.
Balance Sheet Summary
Nexans has a solid balance sheet with net debt/EBITDA of ~1.5x as of Q1 2025. The company generates strong operating cash flow and is expected to turn free cash flow positive in 2025, providing flexibility for debt reduction and strategic investments.
Disclaimer: This is not financial advice. Investing involves risk, including potential loss of principal. Please conduct your own research or consult a financial advisor before making investment decisions.