Photon Energy: discover a great solar growth proxy (BUY - initiation of coverage)
We initiate on Photon Energy with a BUY rating and a 12M price target (PT) of CZK 84/share, implying 56% upside. Photon is an integrated solar downstream company, achieving most of its earnings from green power generation. Founded in 2008 and run by its co-founders, the company offers a wide range of services to its customers, from project development, engineering and building, to operation and maintenance. While the majority of Photon’s generation earnings have come from regulated schemes over the past decade, this year, Photon decided to opt out of the schemes where it could, switching to merchant operations, and now plans to focus primarily on the merchant business model, with two merchant power plants connected to the grid in Hungary already over the past six months. Its busy pipeline of 777MW and 2024E goal of 600MW of its own generation capacity, up from the current 92MW, coupled with the power prices remaining at very attractive levels, change the company’s earnings prospects dramatically vs. a few years ago, with the EBITDA growing at a 28% CAGR over the next three years, on our estimates, and potential upside coming from its water treatment business and promising, well-chosen equity investments. Photon is trading at our 2022-24 EV/EBITDAs of 10.1-12.4x, 18% below its peer group, and we believe the broader market is yet to discover the company, driving its valuation closer to its peers, given its higher growth prospects.Photon Energy NV. Photon Energy NV is a company engaged in renewable energy industry. The Company offers solutions and maintenance services for photovoltaic (PV) systems. It divides its activity into five segments: Wholesale and Import of PV Components that includes purchasing and sale of PV systems components and sales, distribution and support; Engineering and Construction Services that comprises project engineering and turnkey construction of PV plants; Production of Electricity that includes special purpose entities (SPE) engaged in building of PV plants and distribution network and electricity production; Operations, Maintenance and Supervision of PV Power Plants of third parties and internally owned; PV Investment that represents joint venture (JV) companies; Corporate Operations that comprises financing and insurance solutions for PV investors, investments in PV projects, among others. On September 3, 2014, it established new wholly owned subsidiary, Global Investment Protection AG (GIP).
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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