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21 Mar 2022
Upgrade to Outperform, as risks now priced in
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Upgrade to Outperform, as risks now priced in
- Published:
21 Mar 2022 -
Author:
Palomo Manuel MP -
Pages:
8
FY21 results unsurprisingly in line
Enel FY21 results were pre-announced in early February thus there was no surprise. We note the Ordinary EBITDA (+6.6%) included ~EUR1.7bn gains from Open Fiber. The FY21 Adj. NP (+8%), was in line with expectations and company guidance. There was a big gap between the Ordinary NP (EUR5.6bn) and Reported NP (EUR3.2bn): EUR2.4bn was due to charges for energy transition and digitalisation (-EUR1.84bn), value adjustment on generation assets (-EUR1.03bn), Covid-related costs (-EUR36m) and the positive impact from Impairment at Slovenska (EUR540m).
FY22 guidance confirmed, though there are many moving parts
Company guidance for the FY22 (EBITDA EUR19.0-19.6bn, NP EUR5.6-5.8bn) was reiterated. Enel management explained that the FY22 plan is to make up for FY21 positive one-offs (Open Fiber EUR1.7bn and EUR0.6bn Spanish generation) with the reversal of EUR1bn temporary headwind in 2021, Renewables (including EUR150m ERG assets contribution), Networks (EUR0.2bn) on RAB growth, Retail and Enel-X (EUR0.4bn) and EUR0.4bn contribution from the Stewardship model.
Time to revisit - risks largely priced in, in our view
The shares are down -17% YTD and -30% in the last 12 months. This is partly explained by the guidance reset (Nov-21), concerns about underlying growth and FCF generation, and the impact from the invasion of Ukraine, which has raised social concerns and hence regulatory risk (potential clawback of windfall profits). However, Enel remains well positioned to benefit from the new EU policy, regulatory risk impact is limited and, in our view, priced in. Also, Enel has already proven its capabilities in Renewables (5.2GW added in FY21 and 11.6GW in execution) and Networks. There is a price for everything, and in our view Enel''s share price now represents a good entry point.
Upgrade to Outperform (from Neutral) after recent market selloff
We leave our EUR6.9 TP unchanged since lower FY21 net debt compensates...