Investing.com -- UBS Global Research upgraded French engineering and technology company Technip Energies to "buy" from "neutral" on Wednesday, saying its long-term potential more than offsets near-term risks, and set a price target of €39, implying about 30% upside.

The target is down from €41 because of lower near-term earnings after the second-quarter profit warning, a lower valuation multiple of 6.0 times from 6.5 times, and a higher cost of capital to reflect increased risk.

Technip Energies shares closed at €30.32 on Oct. 13. They have fallen more than 20% since the start of the Middle East conflict, as the market focused on near-term risks and extra costs from disruption around Hormuz, UBS said.

The shares trade at 5.4 times expected 2027 earnings before interest, tax, depreciation and amortisation, adjusted for project cash.

That is more than 10% below the three-year average of 6.0 times, even though UBS still sees 2027 as a recovery year.

The market value lost since the conflict began is more than twice the post-tax value of the company’s entire Middle East backlog, UBS said.

The company’s total backlog has reached a record €25 billion and is less reliant on the Middle East, which made up around 50% of the backlog at the end of June 2026. Orders were close to €13 billion in the first half.

UBS cut its 2026 earnings per share forecast to €1.62 and trimmed 2027 by 7% to €2.88. For 2027 it assumes extra cost recovery that lets the project delivery margin return to 7.3% from 5.6% in the second half of 2026.

The company’s 2026 guidance, updated with second-quarter results, is conservative because it assumes no improvement in the Middle East until year-end and no extra cost recovery, UBS said.

It expects the guidance to be confirmed when the company reports third-quarter results on Oct. 29.

In a negative scenario, with no improvement through the end of 2027, no margin recovery, further revenue delays and a lower multiple of 5.0 times, UBS values the shares at €25. Its upside scenario is €48.

UBS said the long-term outlook has improved as more liquefied natural gas (LNG) buyers look to diversify away from the Middle East. It raised its expected number of LNG investment approvals for 2026-28 by more than 10%.

It sees the company well placed for several projects, including Abadi LNG in Indonesia, the new Fujairah LNG project in the United Arab Emirates and another U.S. project.

Technip Energies is working on the first phase of Commonwealth LNG in the United States, whose developer recently announced expansion plans.

UBS said the main catalyst would be a return to normal flows in the Middle East, or at least for Qatari flows. An extended conflict could delay start-ups of Qatari projects, it said.

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