Morningstar | Enel Deleverages Faster Than Expected During the Fourth Quarter; Shares Undervalued
We reiterate our fair value estimate of EUR 5.7 per share along with our no-moat, stable trend ratings after Enel published its 2018 preliminary results, namely revenue, EBITDA, and net debt. We believe shares are currently undervalued.Ordinary EBITDA grew 3.8% to EUR 16.2 billion, in line with our EUR 16.16 billion but slightly below consensus' EUR 16.3 billion. EBITDA decreased by 1% in the fourth quarter, slowing down from the 6% growth achieved at the end of September. Still, one must bear in mind that comps were tough since EBITDA jumped by 30% during the fourth quarter of 2017. Main growth drivers over the full year were renewables owing to improvement in hydro conditions after the 2017 drought, new capacity commissioning, the acquisition of Electropaulo, and free market retail sales in Italy.
Net debt increased by 10% to EUR 41.1 billion, at the bottom end of the EUR 41 billion-EUR 42 billion guidance, and below consensus’ expectation of EUR 42 billion. Net debt increase was driven by active portfolio management, or APM, due mostly to the acquisition of Electropaulo and the public tender on Enel Generation Chile’s minorities. At the end of September, APM impact amounted to EUR 3.65 billion, and we believe that did not significantly change in the fourth quarter. Stripping out this amount, net debt would have been flat meaning that Enel funded organically its capital expenditures and dividend, which we view positively.
Enel Societa Per Azioni is engaged in the generation and sale of electricity through its Generation, Energy Management and Sales Italy Division. Co. is also engaged in the distribution of electricity (Enel Distribuzione) and public and artistic lighting (Enel Sole) in Italy through its Infrastructure and Networks Division. Co.'s Iberia and Latin America Division coordinates Co.'s operations in the electricity and gas markets in Spain, Portugal and Latin America. Co.'s Engineering and Research Division manages the engineering processes related to the development and construction of power plants. Co.'s other divisions are the International Division as well as the Renewable Energy Division.
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.