Ørsted (Hold, TP: DKK405.00) - A neutral Q1 report

Investors were relieved after Ørsted’s decent Q1 results, despite the cash flow being a tad weak, with a ‘no news is good news’ attitude. As the stock is trading largely in line with our valuation of the company’s underlying assets, we consider this fair. We believe further signs of higher project profitability are needed for the stock to move higher, and thus consider the comments about a better farm-down market in interest and pricing to be supportive. In all, we consider the report neutral an...

Ørsted (Hold, TP: DKK405.00) - Anticipation for 2024 tender activity

With record-high 2024 tender activity (up to 40GW of offshore wind capacity set to be awarded by year-end), the supply/demand balance for new capacity is starting to look more promising. With limited growth priced into Ørsted’s share price, we believe any awards at accretive offtake prices could spark capital markets’ belief in renewed profitable growth and spark investor interest. On the other hand, we expect some of the tenders to remain competitive, and the high auctioned capacity could put f...

Ørsted (Hold, TP: DKK375.00) - Good, but not enough

In line with our expectations, Ørsted’s strategic plans featured lower growth, more extensive farm-downs, a dividend halt for 2023–2025, and no new equity. While this should leave the company better capitalised, it was not enough to avoid a credit rating downgrade by S&P from BBB+ to BBB. As the company still has an investment grade rating and more robust growth plans than before, we do not expect a material negative effect. However, we believe it could result in slightly higher financing costs ...

Ørsted (Hold, TP: DKK375.00) - Catalysts look priced in

We believe Ørsted’s strategic plan will be the key focus in conjunction with its annual report, and retain our view of the company not needing to raise equity to maintain its BBB+ credit rating. With lower interest rates and more clarity on its balance sheet and growth plans after the strategic update, we expect to see greater investor willingness to price in a moderate contribution from growth again. With this, a lower WACC and a higher contribution from Hornsea 3, we have raised our target pri...

Supportive changes to Norwegian wind energy resource tax

Last night, the Norwegian Parliament agreed on an effective resource tax on wind energy of 25% versus the 35% previously proposed. At first glance, it seems the scheme will now be investment-neutral for new wind farms, which was a key pushback from the industry to the previous proposal. Among the renewable energy producers under our coverage, the new resource tax scheme will benefit Cloudberry and Bonheur. While some details are still unclear, we estimate it will increase the value of Cloudberry...

Ørsted (Buy, TP: DKK325.00) - Darker before the dawn

Ørsted has started addressing investor concerns over capital allocation and weak profitability, walking away from the unprofitable Ocean Wind 1 and 2 projects, and acknowledging its challenged capital structure. We see a risk of challenged liquidity based on its capex plans, and believe a significant cut in growth targets would be necessary for the company to avoid raising equity. That said, the stock is trading 22% below our calculation of its underlying asset value, reflected by our DKK325 (36...

Ørsted (Hold, TP: DKK360.00) - Growth target revision likely

With no recent project awards and several awarded projects at risk, we believe Ørsted will need to lower its 50GW growth target. With limited growth priced in, we believe a message of capital discipline would be received well by the capital markets, although we see the potential for some negative consensus revisions. We reiterate our HOLD, but have cut our target price to DKK360 (430), as we no longer include growth beyond awarded projects given the challenging market environment and weak prospe...

Ørsted (Hold, TP: DKK430.00) - Moody’s outlook cut to ‘negative’

Moody’s change in Ørsted’s credit outlook to ‘negative’ from ‘stable’ after the warned impairments of up to DKK16bn last week has added fuel to investor concerns related to the company’s willingness to invest in projects with low profitability and liquidity. Credit curves suggest that a potential downgrade could raise the company’s credit margin by ~25bp, increasing its WACC by ~10bp. This, in turn, would slightly lower our DCF-based valuation of Ørsted’s existing business and visible growth of ...

Ørsted (Hold, TP: DKK430.00) - Back to reality

We believe the latest impairments in the US were another reality check for investors about the profitability of growth in the struggling offshore wind market. Assigning a lower value to growth beyond awarded projects and the US portfolio, we have cut our target price to DKK430 (474). We have upgraded to HOLD (SELL) after the 25% sell-off yesterday, but highlight that the stock is still trading 27% above our valuation of the company’s existing business and visible growth. To maintain a premium to...

Northern Lights

Ørsted (Sell, TP: DKK474.00) - Valuation still stretched

Hampered by weak winds and low energy prices, Ørsted’s Q2 EBITDA missed our estimate by 12% and consensus by 14%. With the 2023 headline EBITDA guidance reiterated, we have made only small estimate revisions. We still consider the valuation stretched, with the stock trading at a one-year forward EV/EBITDA of 12.7x, 30% above the historical renewables average of 9.7x. It is also trading 68% above our estimated value of its existing business and visible growth, and we reiterate our SELL and DKK474...

Ørsted (Sell, TP: DKK474.00) - Market headwinds continue

We forecast Q2 EBITDA of DKK3.8bn, just below company-compiled consensus of DKK3.9bn. We see continued market headwinds, with competitors pulling out of projects on poor profitability following significant cost increases and regulators being unwilling to pay the higher cost of offshore wind. We still consider Ørsted’s valuation stretched, with the stock trading ~70% above our estimated value of its existing business and visible growth, and reiterate our SELL and DKK474 target price.

Ørsted (Sell, TP: DKK474.00) - Convincing capital discipline

With its key growth and profitability targets reiterated and the announced inflationary impact on revenues and capex well expected, we believe the key focus at Ørsted’s CMD was its message about capital discipline and value creation. The company highlighted its: 1) bidding discipline; 2) measures to protect margins and improve profitability; and 3) willingness to walk away from projects where value is not created. With the announced targets already largely included in our estimates, we have made...

Northern Lights

Northern Lights

Ørsted (Sell, TP: DKK474.00) - Profitability and capital structure lik...

We expect focus at the CMD on 8 June to remain on: challenges to profitability in the sector; and funding of the company’s targeted growth with higher capex and likely lower proceeds from farm-downs, partly offset by higher operating cash flow. We believe Ørsted will need to take on more debt and/or be more active in farm-downs to avoid having to raise equity. We still consider the valuation stretched, with the stock trading 81% above our estimated value of its existing business and visible grow...

Ørsted (Sell, TP: DKK474.00) - All eyes on project profitability

We expect investors’ focus to remain on the challenging profitability outlook for awarded projects, most recently with the 1GW Baltica 3 also being postponed. The industry challenges have also put pressure on the funding of the company’s 50GW growth target with higher capex and potentially lower proceeds from farm-downs, but offset by higher earnings. We expect more clarity on this at the upcoming CMD. We still consider the valuation stretched, with the stock trading 78% above our estimated valu...

Ørsted (Sell, TP: DKK474.00) - Awaiting tender outcomes

We forecast Q1 EBITDA of DKK6.8bn, fairly in line with consensus. However, we believe the outcome of the ongoing offshore wind tenders in Rhode Island and New York will attract greater attention as this will provide indications for the profitability of future growth given new industry projects have recently seen subdued profitability (particularly in the US). We reiterate our SELL but have raised our target price to DKK474 (470). We still consider the valuation stretched, with the stock trading ...

Northern Lights

Ørsted - Initiation of coverage - Too much growth priced in

Despite Ørsted’s prime position in offshore wind and onshore renewables, we expect industry-wide headwinds (inflation, rising interest rates, competition, value-chain issues) to hamper the profitability of growth. Moreover, multiples are still above historical levels even after the renewables sell-off from the 2021 peak, which we believe is unwarranted given the industry concerns and elevated interest rates. We consider Ørsted’s valuation stretched, and initiate coverage with a SELL and DKK470 t...