Morgan Stanley sees no upside potential for Hidroelectrica's shares

Morgan Stanley has maintained its target price of RON 95 for Romanian power producer Hidroelectrica's shares (BVB: H2O) after a downward revision of the company's 2024 budget.

The current trading price of Hidroelectrica shares on the Bucharest Stock Exchange is RON 129, significantly above Morgan Stanley's target.

The company's revised budget projects a net profit of RON 4.15 billion for 2024, 2025, and 2026, which is below analysts' expectations.

The dividend yield is estimated at 6.7%, considering a 90% payout ratio, which is close to the current yield of Romanian 10-year bonds of 6.9%.

"Thus, we consider that the current valuation of the shares of the shares is high, and we maintain our underexposure rating on this stock," reads a Morgan Stanley note signed by Arthur Sitbon, CFA, equity analyst, quoted by Ziarul Financiar.

The company's market capitalization stands at RON 57.9 billion, with shares trading at a P/E ratio of 9.7 times the net profit.

(Photo source: Inquam Photos/Octav Ganea)