UK-based Yü Group (LSE:YU.) has electrified investors with a staggering 1,463% share price surge over five years. The AIM-listed utilities supplier for small businesses now commands a £327m market-cap, up from just £16.8m in 2019. But with growth rates moderating — the stock’s flat over nine months — shareholders are asking, what’s next for this AIM success story?
What does Yü Group do?
Yü Group provides gas, electricity, and water to UK SMEs — a £50bn market often overlooked by larger rivals. Unlike traditional suppliers, it combines flexible contracts with smart meter installations and energy efficiency consulting. Since its 2016 AIM listing, Yü has capitalised on two supportive trends. These are SME demand for specialist providers as energy costs surged post-Ukraine invasion and a regulatory push for smart meters and electric vehicle (EV) charging infrastructure. This niche focus helped revenue rocket from £112m in 2019 to the £644m forecast for 2024 – a 475% increase.
Why has it ignited?
The valuation data reveals three explosive growth phases:
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| Metric | 2019 | 2024 | Growth |
|---|---|---|---|
| Market-cap (£m) | 16.8 | 327.3 | 1,847% |
| Enterprise Value (£m) | 16.8 | 211.8 | 1,161% |
| EPS (p) | -0.36 | 210.8 | Turnaround |
Yü Group’s financial transformation has been remarkable, shifting from a loss-making position with a negative price-to-earnings (P/E) ratio in 2019 to a profitable state with an attractive 9.3 times P/E today.
This turnaround’s underpinned by robust cash generation, with net cash ballooning to £81.9m in 2023, enabling the introduction of a growing dividend (0.67p per share in 2024 compared to none pre-2023).
Operational efficiency has also improved significantly, as evidenced by the compression of the EV-to-EBITDA ratio from 21 times in 2021 to a forecast 4.3 times for 2024. As noted by Armchair Trader, Yü’s success can be attributed to its asset-light model and focus on high-margin add-ons like EV chargers, which have helped margins outpace revenue growth, positioning the company for continued financial strength.
What’s next? Here’s the roadmap…
While growth’s slowing, the valuation suggests there’s room for upside:
| Valuation Metric | 2024 (Forecast) | 2025 (Forecast) |
|---|---|---|
| P/E Ratio | 9.3x | 8.6x |
| FCF Yield | 30.9% | 19.2% |
| EV/Revenue | 0.3x | 0.2x |
Yü Group’s growth prospects are underpinned by several key drivers. Firstly, the company has significant room for market share expansion, currently holding just 1.3% of its £50bn addressable market. Secondly, Yü’s successfully pivoted towards technology-driven solutions, with smart meters and EV infrastructure now accounting for 30% of revenue, up from 5% in 2020.
Lastly, recent deals suggest potential for international expansion into European SME markets. However, these opportunities are balanced by notable risks. Energy price volatility remains a concern, as evidenced by the dip in EBITDA margin from 8.6% in 2022 to 3.9% in 2023 during gas price spikes.
Regulatory changes, such as potential windfall taxes or margin caps, could also impact profitability. Additionally, analysts forecast a modest annual EPS decline of 1.7% through 2026, suggesting a potential slowdown in earnings growth.
An interesting proposition
At 9.3 times forward earnings and with a 3.9% dividend yield, Yü isn’t pricing heroic growth. Yet its cash-rich balance sheet (£4.89/share) and leadership in an underserved market suggest durability in growth.
While the 1,463% rocket ride’s unlikely to repeat, patient investors could still reap steady returns as this AIM stalwart matures. It’s not the type of company I normally consider, but I’m going to give this one closer attention.
