Greek industrial and energy-exposed companies had a full of developments in 2022, with the main factor being the dynamics of the specific sub-sector, the general macroeconomic outlook and other specific parameters, Eurobank Equities states in its note.
In electricity generation/supply, the sector remains fluid given recent regulatory intervention and, although generation and supply dynamics appear to largely offset each other, there are many variables, not least in terms of natural gas prices gas/coal, but also regulatory aspects that will determine future profitability for producers/suppliers (especially in a scenario of a large increase in gas prices in winter). For refiners, the situation is much clearer in light of “golden age” fundamentals that are set to lead to record profits in 2022 and an adjustment to recurring profitability in the coming years, although models point to a movement in margins refining.
In Renewable Sources, Motor Oil is on track for a rapid inorganic expansion of its domestic RES business following the recent deal with Ellactor, while Mytilineos is emerging as an international player. Other participants (ELPE, PPC) are also strengthening domestic RES capacity. Terna Energy remains unaffected by regulatory intervention in the electricity market, with its activity dominated by the mergers and acquisitions debate. Eurobank Equities’ preference in the broader space is for stocks with room for positive earnings revisions (or alternatively lower risk of downgrades), greater earnings projection, attractive valuation and dividend support. Given current valuation levels and risk-reward, Eurobank Equities rates all stocks in the broad energy space a buy, with Mytilineos and Motor Oil as its top picks.
Mytileneos: Emerging as a leading RES player – Shares have fallen alongside their LME price retreat (660 million euros in 2023.
PPC: Deep value but lots of swings – With the recent reaffirmation of the adjusted EBITDA target for 2022, a short distance from 2021, the loss of €1.7 billion in capitalization as capital raising does not seem to be in sync with the one-off impact of €0.3 billion from the extraordinary production tax. The stock appears to offer value in depth, however fears over natural gas supply and the looming elections in Greece (until Q2 2023) mean this value proposition is unlikely to unlock until more visibility is restored. Eurobank Equities cut its forecast to take into account the latest regulatory interventions, with its target price also cut by the rise in the estimated cost of capital.
Terna Energy: A class of its own – Eurobank Equities has revised its forecasts for Terna Energy to reflect its updated capacity ramp-up assumptions. It has also revised its valuation again to incorporate a “strategic investor” valuation component, given the talk of takeover interest. The target price is increased to €20, based on: 1) a fundamental valuation valuing existing capacity and projects under development until 2025 (3.3 GW) and 2) a “strategy-driven” valuation taking into account the of investments by 2030 (another 3.1 GW).
Refineries: “Golden Age” Fundamentals, Diminished Valuation – While the supply-demand balance is likely to soften from Q4 2022 onwards, valuation levels are very attractive as they have yet to price in the post-Covid margin recovery and positive refining course for the next 12 months. Following the revision of estimates for Motor Oil, Eurobank Equities again revised its estimates for ELPE, raising the target price to €8.60.
Source: Capital
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