Energa – Compensations may reduce the price discount
Distribution and RES account for more than 90% of total EBITDA and more than 60% of planned capex in the next four years, including consolidation of 50% of the OstroÅ‚Ä™ka C project. However, Energa is trading at a 25% discount to the Regulatory Asset Base (RAB), excluding RES assets which generate ca. PLN 0.3bn EBITDA per year. The negative value allocated to conventional generation more than offsets the total expected OstroÅ‚Ä™ka project capex, which only demonstrates the Company’s undervaluation. The eventual launch of energy price freeze compensations should be a positive driver in the coming months, significantly improving the outlook of the trading segment. In our opinion, the latter’s potential normalised EBITDA is up to PLN 0.2bn per year. We maintain the Buy recommendation and upgrade the target price slightly to PLN 12.67 in view of an upgrade of green certificate price projections.
Energa SA is a Poland-based company engaged in the electric power sector. It produces and distributes the electric power and participates in the electric power market in Northern and Central Poland. It divides its business into seven segments: Electricity Distribution consists of electricity distribution conducted by subsidiaries; Renewable Energy invests in renewable energy sources and produces electricity through hydro, wind and bio-energy plans; Baseload Power Plant consists of manufacturing and investment activities in the area of conventional power plants, service and repair activities related to the generation of electricity; Combined Heat and Power (CHP) includes manufacturing activity of power plants and the heat distribution; Sales is engaged in lighting services, trading of electrical energy and customer service; Services provides accounting, human resources (HR) and payroll services, among others; Other includes hotel and training centers, and transportation services.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
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