Energy One Ltd (ASX: EOL), a prominent player in the ASX technology sector, has captured the attention of broker Bell Potter, which has initiated coverage with a buy recommendation. The company, known for its comprehensive suite of software products and services tailored for the wholesale energy, environmental, and carbon trading markets, has seen its stock price soar nearly 180% over the past year.
This remarkable surge is attributed to Energy One’s robust financial performance, characterized by significant revenue growth and increased profitability. In the fiscal year 2025, the company reported a 17% rise in revenue to $61.4 million, with annual recurring revenue (ARR) climbing 22% to $60.4 million. Furthermore, EBITDA increased by 57% to $10.5 million, while net profit after tax (NPAT) surged 74% to $5.9 million.
Bell Potter’s Strategic Insights
Bell Potter’s recent report, released last Thursday, not only recommended a buy but also set a price target of $20.80 for Energy One’s shares. With shares closing at $17.58 last week, this suggests a potential upside of approximately 18.31%.
The broker highlighted Energy One’s extensive reach, with over 450 customer installations across more than 30 countries and a diverse portfolio of 12 products. The company’s unique value proposition lies in its flexibility, speed of implementation, and ability to simplify complexities, positioning itself as a ‘one-stop-shop’ in contrast to more specialized competitors.
Customer Retention and Market Position
Energy One’s offerings are deemed essential for its clients’ operations, making it difficult for customers to switch providers. This high switching cost contributes to a low churn rate, reinforcing the company’s strong market position. Bell Potter emphasizes that Energy One’s intimate client relationships and mission-critical services ensure a resilient earnings stream and the ability to implement necessary price adjustments.
Riding the Decarbonisation Wave
Bell Potter is optimistic about Energy One’s strategic positioning to capitalize on the global shift towards renewable energy. As the share of renewables in the energy mix increases, so does the demand for sophisticated software solutions to manage the associated market complexities and volatility.
Europe’s recent quadrupling of its electricity trading windows presents a significant opportunity for Energy One to expand its market presence through enhanced product offerings and cross-selling strategies.
The broker believes that the critical nature of Energy One’s solutions provides a buffer against market fluctuations, enabling the company to sustain its growth trajectory.
Future Growth Catalysts
Looking ahead, potential growth catalysts for Energy One include strategic mergers and acquisitions in Europe to accelerate expansion. Additionally, management’s commitment to achieving ambitious cash EBITDA margin targets instills confidence in their growth strategy.
As the energy sector continues to evolve, Energy One Ltd’s innovative solutions and strategic foresight position it well to navigate the challenges and opportunities of a rapidly changing landscape.
