Circular Economy as an Investment

[Bjorninen]

@Polakki

Reporting my latest purchase to this thread with a slight delay. Last week on Tuesday, I bought 3,000 shares at a price of 15 NOK of a new company for my portfolio from the Norwegian stock exchange, which I have been following for some time. The company is Cambi ASA, which operates in waste management and whose business is primarily based on thermal hydrolysis (Thermal Hydrolysis Process, or THP). Their customers include wastewater treatment plants around the world. With the equipment provided by Cambi, biogas and fertilizers can be produced from the sludge generated in the wastewater treatment process. The process is explained in more detail in the video below.

Introduction to Cambi’s value chain

The company operates in a growing market, the growth of which is largely driven by regulation, and of course, the willingness of wastewater treatment plants to streamline their processes to be more productive and environmentally friendly. There is an ongoing initiative in the EU for a directive that would mandate carbon neutrality for all wastewater treatment plants by 2040. Here, the THP offered by Cambi helps in achieving this goal by increasing biogas production.

The company is a market leader in its field, and the order backlog is currently at a historic high of 1.8 billion (NOK). Revenue between Q1-Q3 was 682 million (growth of 140% compared to the previous year). Market cap is 2.6 billion (NOK), and if this year’s Q4 is in the same range as the previous quarters, the P/E ratio calculated from this year’s result is approximately 11-14. Cambi’s earnings do fluctuate due to the project business, but a strong order backlog bodes well for the coming years as well. The service business (equipment maintenance, upkeep, etc.) is more stable and predictable. The service business accounts for about 25% of total revenue and naturally grows as more equipment is delivered. The balance sheet is also in strong condition and leverage is moderate.

Overall, I think it’s a very interesting company operating in an industry supported by the green transition and regulation. A weakening economic cycle and inflation dampen the outlook for the coming years, but I am looking far into the future with this company, as there will surely be plenty of demand for Cambi’s solutions in the future.

I definitely recommend checking out Cambi. At the moment, the company seems to be somewhat under the radar, and there don’t seem to be many owners or followers of the company on this forum yet. Below is a recent presentation from the Capital Markets Day in September this year. In my opinion, it’s a very comprehensive presentation of what the company does.

Cambi ASA capital market update

This could fit in the circular economy thread, where there is some discussion about the company.