Photon Energy: diversification starting to pay off (stays BUY)
We reiterate our BUY rating on Photon Energy but decrease our 12M price target (PT) to CZK 101/share (from CZK 105), yielding 48% upside. In line with our January expectations, power prices have fallen ytd, which has also led to weaker EBITDA in the Investments segment. Following the 1Q23 numbers, however, we now see much stronger profitability and sales in the remaining segments, which also require much lower capex or balance sheet needs. We believe the market is yet to appreciate Photon’s unique business model, diversified across the solar downstream sector, especially with growing competition in photovoltaic (PV) power generation facing higher borrowing costs. We now see power prices growing once more in 2H23E and believe the company’s guidance of EUR 29m EBITDA could be met this year, with favourable weather conditions and a timely delivery in Romania. Photon is trading at our 2023-25E EV/EBITDAs of 9.1-13.2x, 27% below its peer group, and on attractive multiples, in our view, despite the very low liquidity of its shares. Adding the potential trigger from its PFAS technology in the coming months, and the hidden value of the company’s equity stake in RayGen, we view Photon as one of our top utilities picks.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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