Morningstar | RWE's H1 Results Above Expectations Due to Rebound of Trading Business; Full-Year Targets Maintained
RWE released first-half results above consensus expectations while confirming full-year targets. We reiterate our fair value estimate of EUR 20.30 per share, along with our no-moat, stable trend ratings. Shares look slightly overvalued.EBITDA came in at EUR 1.14 billion, down by 21% and around 4% above consensus expectations. Adjusted net income came in at EUR 683 million, down by 23% but 9% above consensus expectations.
The main positive driver during the second quarter was the supply and trading business, whose EBITDA amounted to EUR 101 million after a EUR 24 million loss in the first quarter. This is in line with the EUR 200 million EBITDA that we expect over the full year. In line with the first quarter, conventional power generation's profitability was hit by lower achieved power prices and spreads. Segment EBITDA decreased by 42% to EUR 363 million, in line with our EUR 714 million estimate for the full year and with the EUR 650 million-EUR 850 million targeted by the group.
RWE reiterated its full-year stand-alone target of EBITDA of EUR 1.4 billion-EUR 1.7 billion and adjusted net income of EUR 0.5 billion-EUR 0.8 billion, in line with our respective expectations of EUR 1.6 billion and EUR 0.65 billion. One must bear in mind that results are typically first-half-weighted due to Innogy's dividend payment.
RWE's hedging of outright generation is unchanged through 2021 compared with the first quarter. RWE's CO2 exposure is also unchanged. It is hedged at an average price of EUR 5-6/tonne though 2021 versus the current price of EUR 18/tonne.
RWE is an electricity and gas company. The Conventional Power Generation segment consists of the activities of RWE Power, Essent and RWE npower. The Supply/Distribution Networks Germany segment supplies electricity, gas and heat. The Supply Netherlands/Belgium segment comprises the activities of Essent in the Netherlands. The Supply United Kingdom segment comprises the operations of RWE npower. The Central Eastern and South Eastern European segment contains activities in the Czech Republic, Hungary, Poland, Slovakia, Turkey and Croatia. The Renewables, Upstream Gas & Oil and Trading/Gas Midstream segments include the activities of RWE Innogy, RWE Dea and RWE Supply & Trading, respectively.
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