Erste downgrades Romanian Hidroelectrica shares’ outlook, still seen above current price

Austrian financial group Erste revised, in a note to investors, its recommendations for the shares of Romanian hydropower group Hidroelectrica from buy to accumulate while estimating a target price of RON 130 per share, some 5% above the current market price, according to Profit.ro.

The company’s capitalization at the target price is RON 58.5 billion (EUR 11.75 billion).

“The general weakness of electricity prices in the short and medium term significantly impacts Hidroelectrica," Erste’s analysts explain their decision.

The target price estimated by Erste is 3.70% below the RON 135 indicated by British bank Barclays late last month but higher than the estimates published by Citigroup (RON 109) and Morgan Stanley (RON 95) that dragged down the company’s shares below RON 120 on January 23.

The Erste report says that compared to companies with a similar profile in Europe, Hidroelectrica has the advantage of already providing energy at premium prices, as well as the potential for indirect hedging. The storage capacities in the reservoirs allow the company to improve profitability for short-term deliveries efficiently.

The financial forecast carried out by Erste’s analysts indicates weaker earnings in the coming years after the outstanding performance in 2023. Thus, EBITDA would drop by 26.28% y/y to RON 5.89 billion in 2025 from RON 7.99 billion in 2023. The estimated net profit for 2025 is RON 4.31 billion, 30.25% less compared to RON 6.18 billion in 2023.

(Photo source: Facebook/Hidroelectrica)