Morningstar | EDF Posts Slight Sales Growth Despite Mild Weather, Maintains 2019 Guidance; Shares Undervalued
We reiterate our fair value estimate of EUR 14.50 per share along with our no-moat, stable trend ratings after EDF released first-quarter sales and reiterated its 2019 guidance. More clarity on the potentially highly value-accretive breakup of the group should be provided by year-end. We have only factored in 25% of the potential value creation from it, which provides a safety margin against likely cost overruns at Flamanville 3. We believe the shares are undervalued.Group' sales increased 1.7% to EUR 21 billion. On the positive side, French generation and supply's sales grew organically by 2.2% to EUR 8.15 billion, mainly on higher achieved prices. The postponement of the 5.9% increase in regulated tariffs to the beginning of June had a negative impact of EUR 250 million that the group should recoup according to the law. On the negative side, volumes sold decreased by 9 terawatt-hours because of mild weather and market erosion. Nuclear production was flattish, in line with our full-year estimate. Hydro production decreased by 5 TWh versus our full-year estimate of a 7 TWh drop. In Italy, sales grew 5% organically on dynamic electricity activity. Renewables' sales grew 3% organically on positive price and better wind conditions. Last but not least, trading's sales rose 19%, which is encouraging, given very high comps.
Sales in the  United Kingdom decreased 4% organically due to the tariff cap and extended nuclear outages. For 2019, the group guides for a nuclear production of 55-56 TWh, below our 59 TWh estimate. French regulated activities' sales decreased 2.6% organically chiefly due to mild weather.
The company reiterated its 2019 guidance of EBITDA of EUR 15.3 billion-16 billion excluding IFRS 16. We will not change our EUR 16.5 billion estimate upon this publication. Potential downside to our estimates of lower nuclear production in the U.K. and hydro in France could be offset by upside in the trading business and Italy.
Electricite de France is an integrated energy company with a presence in a range of electricity-related businesses: nuclear, renewable and fossil-fuel fired energy production, transmission, distribution, marketing as well as energy management and efficiency services, along with energy trading. Co. is an integrated energy company engaged in all aspects of the energy business: generation, transmission, distribution, supply and trading of energies. Co. is an electricity operator in France and abroad. The breakdown used by Co. for its activities is as follows: France; United Kingdom; Italy; Other International; and Other activities.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.