Ørsted (Buy, TP: DKK325.00) - Darker before the dawn
Ørsted has started addressing investor concerns over capital allocation and weak profitability, walking away from the unprofitable Ocean Wind 1 and 2 projects, and acknowledging its challenged capital structure. We see a risk of challenged liquidity based on its capex plans, and believe a significant cut in growth targets would be necessary for the company to avoid raising equity. That said, the stock is trading 22% below our calculation of its underlying asset value, reflected by our DKK325 (360) target price, which we consider attractive longer term. We have upgraded to BUY (HOLD), but see risk to the downside near-term until any cuts in growth targets and/or potential capital needs have been addressed.
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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