🇮🇹 Prysmian

Stock Idea #73

Invisible but Essential

Cables are not the stuff of headlines and for a good reason... They run under oceans, across fields, and inside wind farms, out of sight and out of mind. Yet of course without them, the energy transition, and you reading this post is impossible. No offshore wind farms delivering power to the grid. No cross-border interconnectors from French nuclear power to German activist’s phone Hashtagging #StopNuke… balancing supply between nations. No electrification of cities. Prysmian, an Italian company most investors barely notice, happens to be the global leader in this secret infrastructure. And just as the world ramps up its ambitions, demand for its expertise is hitting records. The momentum is rigging the bell…

Why Now?

In my opinion the backdrop could not be clearer: Europe and the United States are both engaged in massive grid overhauls (the thesis on American Superconductor never gets old). Offshore wind is recovering from last year’s inflation shock, and governments are determined to secure energy independence. In July 2025, Prysmian’s order backlog crossed 20 billion euros, almost 40% higher than the year before. And stop right there that backlog is not theoretical: it represents contracts already signed with delivery schedules stretching well into the 2030s.

Momentum shows up in the numbers because in 2024 the group delivered nearly 18 billion euros in revenue, a 14% increase, with EBITA rising to 1.6 billion and margins expanding to 9%. More importantly, the mix of activity is shifting toward high-voltage subsea cables, the most profitable segment, where double-digit margins and decade-long contracts provide rare visibility.

An Oligopoly

Only two peers, Nexans in France and NKT in Denmark (I wrote about it, read the deep dive by clicking on the name!), operate at comparable scale. The barriers to entry are ENORMOUS. Producing cables dozens of kilometers long requires giant factories and specialized vessels. Securing contracts demands decades of certification and trust with utilities and governments. This explains why projects such as the multi-billion Dominion offshore wind farm in the U.S. or the Eastern Green Link interconnector in the U.K. almost automatically land at Prysmian’s door if you got me…

The effect is a kind of industrial oligopoly. Once a contract is awarded, the customer is locked in for years, and Prysmian’s backlog becomes a map of future revenues stretching over a decade. In an industry where demand is guaranteed by structural trends, that visibility is gold.

Financial Momentum

The financials confirm the shift because in the Q2 of 2025, revenue grew 11% YOY and EBITA jumped 21%. Free cash flow remains lumpy because projects consume capital upfront, but the trajectory is clear: higher margins, a stronger balance sheet, and faster backlog conversion. Net debt to EBITDA is now below 2x, leaving room for both capacity expansion and returns to shareholders.

Management’s guidance for 2025 points to EBITA between 1.65 and 1.75 billion euros, implying double-digit growth yet again. Given the backlog already secured, this guidance might look almost conservative. The challenge here is not finding demand but delivering on it.

The Road Ahead Us

The drivers of momentum are visible everywhere. Europe is pouring money into new interconnectors to balance renewable generation across borders. The United States is unlocking funding under the Inflation Reduction Act, accelerating investment into long-distance transmission. Offshore wind projects that looked frozen last year are being restarted at scale. Prysmian, with new factories being added in both Europe and the U.S., is increasing capacity precisely as the orders keep coming in.

Risks That Lurk

Prysmian’s investment case is not without caveats. The group operates in an asset-heavy industry, where maintaining and expanding factories and cable-laying vessels requires constant capital expenditure. What looks like a moat can also be a treadmill: any misstep in capacity planning could quickly erode returns. Margins, while stable, remain structurally thin at ~9–10% EBITDA, leaving little room for error if raw material, labor, or energy costs spike under fixed-price contracts. The record €20B backlog, that I often cited as proof of structural growth, is not equivalent to cash in hand; projects can be delayed, renegotiated, or cancelled if financing or permits stall. Finally, even if the “green transition” narrative drives optimism, Prysmian remains exposed to macro swings in rates, public spending, and copper prices. Add to this a valuation already richer than peers like Nexans or NKT, and the risk is that any slowdown in execution or policy support could trigger a sharp derating.

Scenarios 2026–2030

If momentum holds, Prysmian could see a “Fortress Grid” scenario where interconnector demand keeps rising, offshore wind stabilizes, and the backlog pushes past €30 billion. That would support double-digit EBITA growth and a rerating closer to premium infra names.

The base case is more modest: demand stays strong but execution bottlenecks (vessels, supply chain) slow backlog conversion. Growth continues, but at a steadier pace, with EBITA margins capped around 10%.

The bear case would be a policy shift: governments backpedal on offshore wind or interconnectors get delayed. In that world, the backlog still protects revenues, but the pace flattens and the premium valuation unwinds. Or it could be bad execution with the current situation of the company… let’s watch closer:

What to Track

First, watch the book-to-bill ratio: intake must consistently exceed revenues if demand is truly structural. Second, focus on backlog conversion: delays or cancellations would directly undermine the growth story. Third, monitor margins versus input costs: with fixed-price contracts, any spike in copper or energy can eat into already thin profitability. Finally, keep an eye on capex discipline: new factories and vessels only create value if they translate into higher ROIC, not just higher debt.

Those four data points tell you more than any analyst target.

Action Plan

For you, the strategy is to buy the dips created by execution noise, (or DCA). A delayed interconnector or a vessel bottleneck might spook the market, but the structural demand does not vanish overnight. The grid transition is not a “theme of the year” in my opinion, it’s a decade-long restructuring because now the bubble exploded and serious people are taking it from here. Momentum players should lean into temporary weakness, not chase ‘peaks’. But again, some of the conditions above must be reunited otherwise it’s a No go:

Conclusion: Hidden, Critical, Risky Though

Prysmian is a business that sells kilometers of copper and fiber wrapped in insulation. But in practice, it sells something more important: the backbone of the energy transition. With a record backlog, improving margins, and political momentum firmly on its side, the company is positioned to benefit for the rest of the decade.

This is the kind of Hidden Market Gem that hides in plain sight. You never see the product, but you cannot build the future without it. However as we talked about it with

Daniel's Deep Dive

the risks are high. I am waiting for sign (execution) that will de-risk the thesis, at least a bit…For me that a company that has its seat in 🟡 : Watchlist. for now.

Confidence Scale:

🟣 : High Risk, High Reward — No it’s not risky
🔵 : Strong Confidence — The risk are too important and and man the valuation…
🟢 : Good Confidence — Just perfect here
🟡 : Watchlist

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This analysis is for informational purposes only and does not constitute financial advice or investment recommendations. Investing in financial markets involves risks, including the risk of loss of capital. Always do your own research or speak with a qualified advisor.