Morningstar | EDP's First-Quarter Results Hit by Poor Weather Conditions; Shares Fairly Valued
We reiterate our fair value estimate of EUR 3.26 along with our no-moat, stable trend ratings after EDP released mixed first-quarter results and reiterated its full-year guidance. Our fair value estimate is aligned with the takeover price from China Three Gorges.Recurring EBITDA came in at EUR 921 million, flattish versus last year, though 4% above consensus' expectations. On the negative side, the largest division, renewables, experienced a 6% slide in recurring EBITDA, versus our negative 2% estimate for the full year. Poor hydro and wind conditions more than offset wind capacity commissioning, higher power prices and the suspension of the generation tax in Iberia. On the positive side, networks' EBITDA heightened 11%, versus our 15% growth estimate for the full year, on commissioning of the first transmission line in Brazil in December 2018 and solid demand growth there. Client solutions' EBITDA increased by 13%, versus our 11% full-year growth estimate, on suspension of generation tax in Spain and of clawback in Portugal.
Net profit dropped by 39% to EUR 100 million, 14% below the consensus expectations. Adjusted for one-offs, namely the extraordinary energy tax in Portugal, net profit fell 32% to EUR 167 million because of the higher tax rate and lower financial result due to negative non-cash impact of mark-to-market of financial hedges, increase in cost of debt reflecting the higher weight of debt denominate in USD and BRL, the hybrid issuance in January 2019, and IFRS.
During the conference call, management stated it was comfortable with current consensus net profit of EUR 0.8 billion, in line with our EUR 812 million estimate, though it mentioned some risks should wind and hydro conditions not improve.
EDP Energias de Portugal is a utility company engaged as a generator, distributor and supplier of electricity in Portugal, and as an electricity generation company and a gas distributor in the Iberian Peninsula. In addition, Co. is a wind power operator with windfarms for energy generation in the Iberian Peninsula, the U.S., Canada, Brazil, France, Belgium, Italy, Poland and Romania and is engaged in developing wind projects in the U.K. Co. is also engaged in generating solar photovoltaic energy in Portugal, Romania and the U.S, and in Brazil it is engaged as an operator in electricity generation. As of Dec 31 2015, Co. had 9.7 million electricity customers and 1.4 million gas customers.
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