ELIA: Quality with some value left on the table again
At the end of April we saw limited ST potential for the Elia share and downgraded to Hold. Since then the share has come down significantly (from € 105 and even € 112 at its peak). Although we still see lower EPS over 2020-2021 (slightly trimming our ST estimates further and our TP from € 105 to € 102), the LT equity growth story remains intact. With an anticipated EPS CAGR of 8.7% by 2024 (vs FY20e) and the energy transition providing significant further CAPEX potential after that (especially in Germany), we believe the current valuation again leaves sufficient potential on the table. As we see 19.9% upside from the current share price in our scenario, for a Covid-19 proof and defensive stock, we consider the current valuation an interesting inflexion point and upgrade to BUY.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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