Saipem (SPMI.MI): SPM to Divest Shallow Water Drilling to ADES

Research evidence excerpt

Saipem (SPMI.MI): SPM to Divest Shallow Water Drilling to ADES

Saipem (SPMI.MI)

24 June 2026 Citi Research

Saipem

Valuation

Our 12-month target price of Eur 5.1/share is based on DCF valuation in which 2026-30E cash flows are modelled explicitly.

Our terminal value assumes 0% terminal growth and 12.0% EBITDA margin. We discount these cash flows at a WACC of 10.6%.

Risks

We rate Saipem High Risk due to its exposure to highly cyclical offshore drilling markets and uncertainty relating to recovery of

payments on legacy E&C projects. We identify the following company-specific and industry risks that could keep the shares

from reaching our target price:

• Litigation – Saipem is involved in various litigations and arbitrations with the customers. Resolution of the issues could take

time and could lead to fines and penalties higher than expected.

• Commodity demand – Saipem’s customer base is highly sensitive to underlying demand and prices for oil & gas. A sharp upturn

or downturn in demand would impact results.

• Labour and raw material inflation – While measures are taken to hedge a potential rise in input costs, there remains the risk of

cost overruns that could impede profitability.

• Reputational damage – Engineering firms rely on their execution track record and reputation to win new business. Association

with an industrial accident, poor project execution, and/or suggestions of improper behaviour could impair Saipem’s ability to

compete for new awards.

• Foreign exchange risk – The majority of Saipem’s contracts are denominated in USD, yet it incurs a significant portion of costs

in other currencies.

If the impact on the company from any of these factors proves to be greater than we anticipate, the stock will likely have

difficulty achieving our target price.