EUR 300.00 For Business Accounts Only

PUBLIC POWER CORPORATION (PPC) | Larger, greener, stronger

New Strategic Plan accelerates green growth… – PPC’s updated Strategic Plan outlines the path to the company becoming a leading green integrated supplier in the SEE. Through the announced €9bn capex plan, management targets €2.3bn EBITDA by 2026e (15% 3-year CAGR vs PF 2023e EBITDA of €1.5bn), RES installed capacity of 5.5GW and full delignitisation. Despite the stock’s c35% rally over 5 months, we stress that there is far more upside, arguing that the current valuation does not capture the evolving energy mix (65% from RES incl. large hydro by 2026e) and PPC’s advantageous net long customer exposure. We thus reiterate PPC as one of our top picks in Greece.

…through a major reshape in Generation… – The new business plan guides for 4.1GW of RES additions by 2026 (2.9x the 2023 capacity), underpinned by the 5GW that are in advanced stage of maturity. Our numbers are somewhat more conservative targeting 4.6GW installed capacity by 2026e, to account for the risk of potential delays inherent in RES project development. That said, PPC is still set to be the largest and fastest growing RES player in the SEE region. On conventional generation, we assume full delignitisation by 2026, in sync with mgt target, while also incorporating the operation of the currently under development, highly efficient 840MW CCGT by the same year.

… an enhanced business model in integrated supply – The “holistic partner strategy” in integrated supply aims to enhance customer retention and expand the customer base, leveraging additional value-added services offered through Kotsovolos. The termination of the HV loss-making contracts will be accretive to PPC profits, offsetting the impact from the retreating local market share (to c45% by 2026e). As for Romania, we align with management guidance for a stable 18% mkt share, effectively expecting PPC to retain mkt leader status in both countries. As for synergies, the Kotsovolos deal offers €100mn in capex savings while Romania is poised to contribute €50m per annum arising from cross-border optimization and trading.

…and robust RAB growth in distribution – We expect Group RAB to increase to €5.1bn by 2026e from €4.3bn in 2023e, namely c6% CAGR, fueled by the €2.4bn investment plan. Besides the RAB growth, we expect the segment’s profitability to be further propelled by the realized uptick in HEDNO’s WACC (to 7.66% from 6.7%) and a likely WACC uplift in Romania (to c7% from 6.4%) in the next regulatory period in 2025.

Valuation: raising PT to €17.5, Top pick – Incorporating the recently acquired Romanian assets and reflecting PPC’s updated business plan, we raise our 2024/25e EBITDA by 31/40% (6/14% organically), aligning with mgmt for FY’24e (EBITDA at €1.7bn, +13% yoy) while remaining c9% below 2026e guidance due to our assumption for lower RES additions. Our updated estimates filter through to an increased PT of €17.5 (from €13.0 previously), placing the name at 7.8x 1yr fwd EV/EBITDA, namely at par with its higher priced peers. We believe this multiple can be justified by PPC’s superior growth profile and the rapidly shifting energy mix towards RES. Our reverse engineering exercise also suggests that at the current price, PPC’s conventional generation/supply business is valued at