Orsted (Hold, TP: DKK325.00) - Near-term relief likely
We believe Orsted will improve its capital structure sufficiently to maintain its BBB+ credit rating without having to raise equity and that the liquidity-enhancing plan set to be presented early next year, likely with lower and more realistic growth ambitions, will provide relief for the capital markets. While this, along with potential impairment reversals, declining interest rates, and rising tariffs could be positives near-term in our view, we are concerned about the longer-term profitability of offshore wind unless costs decline. We reiterate our DKK325 target price but have downgraded to HOLD (BUY) and view the stock as fairly valued on underlying values. We believe investors need more clarity on the company’s balance sheet and the longer term potential for profitable growth before assigning any value above this.Orsted is a renewable energy company based in Denmark. Co. is engaged in developing a renewables portfolio based on competences in offshore wind, bioenergy, and energy solutions. Co. is active in deploying offshore wind and converting existing coal- and gas-fired power stations to sustainable biomass, providing a heat and power supply which is both green and flexible. Co. divides its operations into four businesses: Wind Power, Bioenergy & Thermal Power, and Distribution & Customer Solutions. The Bioenergy & Thermal Power and Distribution & Customer Solutions businesses jointly constitute Co.'s Danish utility business. Co. maintains activities primarily in Northwestern Europe.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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