Goldring values Romanian Hidroelectrica's shares slightly above current market price

Romanian brokerage house Goldring has a price target for Hidroelectrica (BVB: H2O) shares between RON 129.23 and RON 131.56 in the next twelve months, according to a report published on the company's website.

Hidroelectrica's shares ended the February 2 trading day at RON 128.1.

"The information that was the basis for establishing the price range is based on the revenue and expenditure budget for the following period, the preliminary results for the year 2023, as well as specialists' estimates regarding the economic recovery but also regarding the price of electricity and the maximum flows of Danube," reads the report issued by Goldring, quoted by Bursa.ro.

The report is based on assumptions for an annual electricity production of 17.3TWh this year.

Based on preliminary 2023 financial results published by Hidroelectrica and assuming a distribution rate of 90%, according to the issuer's dividend policy, the brokerage house estimates that in 2024, the company would distribute dividends worth RON 5.4 billion (RON 12.05 per share), resulting in a yield of 9.5% based on the latest market price of its shares.

For the evaluation of the Hidro share, the team from Goldring used the method of discounting future cash flows and the comparative method with multiples of evaluation of similar companies in international markets. Hidroelectrica has a PER of 9.12, while the average of the sample is 20.21, and the median is 14.44. Companies comparable to Hidro include Enel from Italy, Iberdrola from Spain, Fortum Oyj from Finland, Veolia from France, and Verbund from Austria.

Through the comparison method, the Goldring team obtained a price of RON 131.56 for Hidroelectrica shares, according to the report.

Regarding the method based on cash flow updating, the document mentions that the forecasts were made in the medium term, the period 2023-2026 being considered a medium investment term. The target price resulting from the application of this method for the Hidro share is RON 129.23, according to the Goldring report.

(Photo source: Inquam Photos / Octav Ganea)