HERA: coverage dropped

We have dropped our coverage of Hera owing to internal reorganisation. Our valuation range and estimates are therefore no longer valid.

9M23: great performance, no surprise

Hera posted a great performance in the first nine months of 2023, with increasing contributions from Electricity, Waste, and Water, while Gas earnings decreased moderately in Q3 following a weaker start to the year. Earnings benefited from both an organic effect with the acquisition of new customers and M&A transactions. No guidance has been communicated for FY23 but these results are in line with the expected growth in the 2026 trajectory.

Solid PandL trends in Q3, FCF generation to restart in Q4

Solid Q3 trends; on track to reach FY23 consensus profitability estimates Q3 EBITDA growth was c. 18% YoY (to EUR289m) thanks to a positive performance in the electricity sector, which continued to benefit from higher unitary margins and higher sales from energy efficiency projects. On the contrary, the gas sector suffered from a tough basis of comparison as it normalized in 2023 and waste EBITDA was flattish in Q3 despite the consolidation of ACR. The customer base growth accelerated to c. +9%

H1 23: solid performance from the four segments

On the same track as in the first quarter and with little surprise, Hera published a solid H1 23 with rising earnings in Electricity, Waste and Water, whilst Gas decreased moderately after a mild winter that weighed on the Q1 23 earnings. The group does not provide a FY 2023 guidance but remains confident that it can deliver the financial objectives of the Business Plan 2026.

Unitary margins drove the performance - debt under control

Q2 2023 above our expectations due to supply margins expansion Hera has unveiled its Q2 2023 results, which were higher than our estimates: EBITDA +19% YoY, EBIT +21%, net income +7%. The main driver of this set of results was the electricity division, which took advantage of higher unitary margins. Net Debt reached around EUR 4,146m, up vs. EUR 3,815m posted as at the end of Q1 2023. This dynamic is mainly connected with the dividend payment, the capex deployment and a temporary NWC effect lin

Q1-23: Ongoing growth sustained by both organic growth and scope effects

Hera published a solid Q1 performance with strong organic growth in its two most strategic growing business units, energy and waste, amidst resilience for the gas segment. The Group will continue to focus on these strategic business units, both internally and supported by M&A, as outlined in its 2022-26 strategic plan presented earlier this year. We are confident in the group’s strategy, particularly with regard to the moderate 2.84x leverage and its past experience in delivering on acquisitions

A sharp debt reduction

Q1 2023 a tad higher than expected. Debt reduction driven by gas destocking Hera has unveiled its Q1 2023 results, which were a tad higher than our estimates: EBITDA +9% YoY, EBIT +7%, net income +1%. Net Debt reached around EUR3,778m, down vs. EUR4,250m at end 2022. This dynamic is mainly connected with the reduction in stored gas. We note that the level of gas stored was at 55% of the capacity as at the end of March, which compares with ca. 84% at the end of 2022. Hera was one of the largest c

It''s getting better

A more favourable context: easing inflation, rate hikes end and allowed returns upside Easing inflation pressure and the potential imminent end of rate hikes are positive elements for the Italian utility sector and thus for Hera (easier refinancing/debt cost management/DPS appeal). In addition, based on the changes of parameters that drive the revision of the WACC/allowed return, we estimate that the theoretical change in the allowed return would be 0.94%, which could mean the new allowed retur

FY2022: Waste and unregulated activities drove the growth

Hera reported FY2022 results above the market consensus and the group’s outlook, but below our expectations, unsurprisingly mainly attributable to growth in the gas activities as well as the waste management business unit, amidst a soaring energy price environment. The regulated activities suffered from a lower revised WACC although this was notably offset by good progress in the unregulated businesses, through energy transition solutions, circular economy and solutions. The group increased its

A positive outlook driven by waste and energy supply

No surprises from Q4 2022 results. Dividend yield at ca. 5% Hera has unveiled its Q4 2022 results, which were in line with the preliminary figures unveiled early in February when the company announced its new business plan: EBITDA + 23% YoY, EBIT +36%, net income +315%. On a FY basis, EBITDA was up ca. 6% YoY, EBIT +3% and net income -4% (ca. +1% if we exclude 2021 positive one-offs). The net financial position reached EUR 4.25bn, with a net debt/EBITDA ratio of 3.28x (ca. 2.9x if we exclude the

Finding balance

With a well-balanced business mix and almost no exposure to fluctuations in energy prices/windfall profit taxes, we expect Hera to benefit from steady growth, no major short-term refinancing needs and relatively low leverage. The new plan increases visibility and confirms the dividend policy. 2023 Outlook for Sector Valuation and Performance The sector screens a touch expensive vs. the market but it maintains its historically superior dividend yield and still offers an attractive earnings yie

2022-26 strategy: a more balanced capex plan to the profit of networks

The new strategic plan introduced by Hera for the 2022-26 period highlights a better balanced business model between regulated activities and liberalised businesses, still focused on waste, networks and energy. After an unprecedented year, the group reported a 19% higher than expected dividend to €0.125 for 2022 and intends to invest more than €4.1bn by 2026, up by 59% vs the last 5-year plan, on a more well-balanced strategic plan, leveraging on both organic growth and M&A operations.

Q3 22: resilient in a complex and volatile macro environment

The results reported by Hera for the Q3-2022 again highlighted a resilient business model, especially in such a volatile environment with many uncertainties. Despite the current energy crisis, the Italian utility showed its robustness thanks to its diversified activities, combined with a well-balanced profile between internal growth and M&A. The group continues to make significant investment in its transition to renewable energy as well as a strong effort in gas storage.

A supportive outlook for Q4, opportunities may arise

A resilient set of results, bang in line with our estimates Hera has unveiled its Q3 2022 results, which were bang in line with our estimates: EBITDA almost flat YoY; EBIT -3% and net income adj. -30% (due to higher provisions linked to higher prices/revenues). The main EBITDA drivers were the positive performance in the energy efficiency sector, the quality premia in the water and businesses and the higher contribution of the plastic recycling business. Net debt reached EUR 4.49bn, up vs. EUR 3

Feedback from investor meetings: cyclical fears prevail

Elections confirm polls, with the right-wing coalition winning a majority of seats The Italian elections resulted in the right-wing coalition led by Giorgia Meloni of the Brothers of Italy winning a majority of seats in both lower and upper chambers, though far from the 2/3 needed to change the constitution. The new government will officially start in the week of Oct 10th, and after an initial phase of selecting ministers, it can begin effectively governing from early November. Thus, we may ne

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Morning Note – 16 April 2024

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Q1 Operating Results

Another Good Year of Diversified Growth with More to Come in 2024 CCapital have released their Q1 operating results. Overall, revenue has come in slightly lower than expected at $80.2m vs TamE of $85.9m but is largely tracking in line with our FY24 annual estimate and we note the company has maintained guidance. Drilling revenue for this quarter was impacted by a fall in utilisaztion rates as well as general remobilisation geographically but we expect a strong recovery throughout the year as k

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

PROGRESSIVE: Severfield: Step change in European and Indian outlook

Severfield’s full-year results to March will be ‘slightly above’ the Board’s expectations, according to today’s trading update, with net debt significantly better. We maintain our PBT estimates for both forecast years, which are ahead of consensus, but reduce our net debt for FY24E. Record orders were boosted by the steel specialist’s European operations, after last year’s Voortman acquisition, while the Indian JV has seen ‘another step up in profitability’. The group has also launched its first

Clean and competitive fertiliser