First Berlin – 2G Energy AG Research Update (03/12/2019)

First Berlin Equity Research has published a research update on 2G Energy AG (ISIN: DE000A0HL8N9). Analyst Dr. Karsten von Blumenthal reiterated his ADD rating and increased the price target from EUR 39.00 to EUR 48.00.

Abstract
2G has released sales and EBIT for the first nine months. On a nine-month basis, the company continued its profitable growth. Sales rose by almost 8% to €141.5m, and EBIT reached €4.9m after €4.0m in the prior year period. The high order intake in September and October is very promising. 2G has confirmed 2019 guidance and expects sales of €230-€250m in 2020. Due to the high order backlog in the CHP plant business and the growing service business, we maintain our 2020 sales estimate of €250m. For the following years, we expect further growth with rising margins, as we see 2G as a clear energy transition winner. The phase-out of nuclear power (-9 GW) and the first phase of the coal exit (ca. -13 GW) will reduce the base-load electricity supply by ca. 22 GW by the end of 2022. The emerging power supply gap will open up a large market for producers of distributed gas power plants such as 2G. We therefore believe that 2G's medium-term forecast of €300m by 2024 is easily reachable. Economies of scale and a further increase in production and process efficiency lead us to expect an EBIT margin increase towards 10% by 2024, which we have incorporated in our revised DCF model. This results in a new price target of €48 (previously €39). Our recommendation remains Add.