Verbund raised to HOLD, TP EUR 38 - Upgrade following price drop
We raise our recommendation to HOLD from REDUCE given that the share is now trading more in line with its key earnings driver and following the market correction, while we confirm our target price of EUR 38. Verbund is now trading at multiples not seen since the beginning of the CO2 price rally. With power price hedging securing revenues to an extent of about 60% at the beginning of any given business year, Verbund has some resilience to an economic downturn, but lockdowns weigh on power demand (e.g. Italian power consumption is down almost 50% week-on-week) and short-term prices, which are also exposed to falling energy prices; apparently, some risks for 2020e remain.Verbund is a public utility company engaged in the generation and transmission of electricity from subsidiaries' hydro and thermal power stations located throughout Austria. Through its subsidiaries, Co. is involved in the planning and construction of water systems, hydroelectric power plants, river structures, sewage disposal systems, and high voltage transmission towers and lines. Co. generates, trades and sells electrical energy to power exchange buyers, traders, energy supply companies and industrial companies as well as households and commercial customers.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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