First Berlin – Energiekontor AG Research Update (08/09/2017)

First Berlin Equity Research has published a research update on Energiekontor AG (ISIN: DE0005313506). Analyst Dr. Karsten von Blumenthal reiterated his BUY rating and decreased the price target from EUR 27.00 to EUR 24.90.

Abstract
Energiekontor's H1 earnings were slightly below the previous year's numbers but ahead of our estimates. Whereas the Power Production and the Operations & Innovation segments were in line with our forecasts, the Project Development segment's EBIT contribution was significantly higher than expected. The company disclosed that it will add 50% of the current year's project volume to its own wind farm portfolio (FBe: 35 MW). We believe this is a very good strategy. The German wind farm projects that Energiekontor will commission this year still receive high feed-in tariffs and thus look set to generate high cash flows over the 20 year feed-in tariff period. This will, however, result in much lower earnings from the sale of wind farms than in 2016, when all projects were sold. For 2018E, we expect Energiekontor to complete wind farm projects with a total capacity of ca. 70 MW. However, given the result of the second German onshore tender round in August (average volume-weighted awarded value of only 4.28 €Ct/kWh), we anticipate strong competition and low pricing in Germany also in 2018E and thus reduce our forecasts. We continue to believe that 2019E will be a very strong year for the company as international projects (especially Scotland, but also the US) will generate significant additional earnings. An updated DCF model yields a new price target of €24.90 (previously: €27.00). We reiterate our Buy rating.