Swiss Capital has reaffirmed a neutral rating on Hidroelectrica (BVB: H2O) with a target price of RON 115 per share, about 6% below its latest close of RON 121.7. The brokerage sees near-term earnings pressure from weak hydrology, softer power prices and a refurbishment-driven investment cycle that weighs on free cash flow and returns on capital.

The research note, published on the BVB Research Hub, projects 2025 net profit of RON 3.17 billion, down 23% year-on-year, and EBITDA of RON 4.47 billion, 19% lower versus 2024. In the first half of 2025, electricity sales dropped 23% to 6.74 TWh as hydro output plunged 27% amid severe drought, while third-party purchases surged 62% to fill supply gaps.

Swiss Capital now expects full-year hydro production of 11.5 TWh, 15% below last year and 1.5 TWh under budget. Management compared 2025 to 2012, the weakest hydrological year on record. Despite savings from lower electricity-purchase costs and a halved construction-tax rate, analysts say these offsets “cannot close the hydrology gap to meet the budgeted profit.”

On the positive side, Romania’s full electricity-market liberalisation from July 2025 and the removal of the windfall tax should support margins in the supply business, with household tariffs reset to RON 450/MWh.

Still, Hidroelectrica faces an intense CAPEX cycle exceeding RON 8 billion through 2027, dominated by refurbishments at Vidraru, Stejaru, Mărișelu, Râul Mare Retezat and Brădișor. These works preserve generation capacity but add little new output, “depressing ROIC and leaving limited upside for re-rating,” the broker said.

At the target price, the company trades at 11.4× 2025 EV/EBITDA and 17.3× P/E, a premium to Austria’s Verbund AG.

Swiss Capital flagged prolonged drought and higher-than-budgeted refurbishment costs as key risks, while faster-than-expected hydrology recovery remains the main upside trigger.

editor@romania-insider.com