Verbund: no reason for premium vs. peers (HOLD - initiation of coverage)
Verbund is the largest energy company in Austria, and one of the largest generators of hydroelectric power in Europe, with 8.3 MW of installed hydro capacity and average 2015-21 hydro production of 30 TWh. In addition, the company owns the Austrian Power Grid (APG), Austria’s largest power transport company, and bought a stake of 51% in Gas Connect Austria (GCA), the Austrian high-pressure gas grid, in 2021. The company plans to increase its exposure to renewable energy production and has acquired, in the past 18 months, a generous portfolio of wind and solar projects. We see the hydropower generation EBITDA rising by 61% yoy in 2023E, on the back of higher realised power prices, lifting the group EBITDA by 42% yoy, to EUR 4.4bn. From 2024E-onwards, we expect a gradual decline in realised power prices and we see the EBITDA for the group contracting, on average, by 11% over 2024-27E. Verbund trades at a premium vs. its peers on our 2023-24E EV/EBITDAs, which we do not see as justified, given our expectations of falling profitability. We value Verbund using a mix of a DCF and a peers valuation, initiating coverage with a HOLD rating and a 12M price target (PT) of EUR 87.2, implying 6.1% upside to the current share price.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.
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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