Ignitis Group: Bloodied, but still attractive (stays BUY)
We reiterate our BUY recommendation on Ignitis, with a new 12M price target (PT) of EUR 24.8/share, implying 22% upside. In September, the company’s power distribution was hit by an unexpected change in the compensation scheme. Effectively, the company’s RAB income has been reduced for 2022-26E vs. our previous assumptions and it was also charged EUR 160m retrospectively for 2018-21E. While not the company’s doing, this is very disappointing, and we understand investors who might now rethink their future investment in the regulated business in Lithuania. Even after updating the regulation, by including a new tariff component, which partly offsets the lower EBITDA, the impact on the distribution segment is simply negative. However, we believe this is priced in already and, with no large risks for the distribution segment expected by 2026E, the market can now focus on the company’s RES pipeline and the upside potential stemming from higher power prices, in our view. Recently, Ignitis received two very solid ESG ratings, it distributes a generous dividend, and it remains cheap vs. its peer group, trading at our at 2021-23E EV/EBITDAs of 6.6-8.0x and P/Es of 8.8-11.4x, at 29% and 37% discounts vs. its peers, respectively.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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