First Berlin – 2G Energy AG Research Update (20/11/2020)

First Berlin Equity Research has published a research update on 2G Energy AG (ISIN: DE000A0HL8N9). Analyst Dr. Karsten von Blumenthal upgraded the stock to ADD and increased the price target from EUR 70.00 to EUR 90.00.

In the third quarter, 2G Energy showed very strong growth in sales (+34% y/y) and overall output (+20%) and thus slightly exceeded our expectations. EBIT also grew strongly (+33%). Incoming orders rose by 3% y/y to €123m and will ensure good capacity utilisation until the end of the 2nd quarter of 2021. It is still possible that 2G will reach the upper end of guidance, but there is a risk of project delays due to the resurgence of the pandemic and tightening of countermeasures in many countries. We therefore stick to our forecast for 2020 which is approx. in the middle of guidance. 2G has given a first outlook for 2021 and announced a revenue range of €240 – €260m. We consider this to be a very cautious outlook and stick to our sales forecast of €270m for the time being. It is becoming increasingly clear to us that Germany risks running into a base load power supply shortage in the medium term due to the combined nuclear and coal phase-out. We see the introduction of the so-called ?south bonus? in the new German CHP Act as an implicit admission that southern Germany in particular needs additional base load capacity. Distributed combined heat and power plants, such as those manufactured by 2G, are one of the few inexpensive options that can be implemented quickly to avert the looming power shortage. We therefore increase our medium-term estimates. An updated DCF model results in a new price target of €90 (previously: €70). We upgrade the stock from Reduce to Add.