Elia Group AI investment tsunami whips up TSO valuations
We upgrade our recommendation to Accumulate and raise our price target to €135.0 from €110.0 on multiple expansion over the next 6 to 12 months. We leave our EPS estimates for FY26-27 unchanged, but increase our price target to 22x FY27 EPS. Our previous target was based on 20x FY26 EPS, but we roll forward on a 10% higher multiple as the sentiment towards grid operators benefits from the “wall of money” into datacenters, while grid connection is the bottleneck. It can take years before the ROE of these investments surfaces, but for now, deep pockets are competing to increase computing power in Europe. This complicates the LT investment plans of the TSO's that focus on offshore wind and balancing the grid from Solar surges. For AI, TSO's have to concentrate capacity to very specific points in the grid. We expect ETF flows to push up valuations as the theme remains hot. There is also a self-fulfilling element as Elia expects to raise >2.0bn in Equity-like before FY28. A higher share price means less dilution. Elia reports on 5/3.Elia System Operator develops, operates and maintains very-high-voltage (380 kV, 220 kV and 150 kV) and high-voltage (70 kV, 36 kV and 30 kV) networks, providing its customers with consultancy and engineering services. Whether in Belgium, Germany or elsewhere in Europe or the U.S., Co. ensures that electricity flows reliably from energy producers to distributors and large corporate customers. Co.'s main activities include transmission operator, system operator and market facilitator, developing and maintaining grid infrastructure, connecting electrical installations to grids, providing transparent access to grids, while taking initiatives to improve electricity market operations.
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