First Berlin Equity Research has published a research update on Diversified Energy PLC (ISIN: GB00BYX7JT74). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from GBp 3600.00 to GBp 2800.00.

Abstract
DEC is trading at a 44% discount to its peer group based on 2024E EV/adjusted EBITDA, but has a superior growth track record. We expect DEC’s adjusted EBITDA to have grown at a five-year CAGR of 10.5% by the end of this year compared with 8.3% for its peers. Recovering commodity prices and a pick-up in acquisition activity by DEC (three transactions completed since June) suggest the company will be able to sustain its historic growth rate going forward. We think DEC should trade on a 2024E EV/adjusted EBITDA multiple closer to the peer group figure of 9.7x. Applying a multiple of 7.7x to our 2024 forecast (a 20% discount to the peers to take into account their higher market caps.) produces a per share valuation for DEC of GBp2,817. We set a new price target of GBp2,800 (previously: GBp3,600) and maintain our Buy recommendation. The price target of GBp3,600 in our most recent note of 19 December 2023 was based on a discounted dividend valuation. However, following the 2/3 cut in the Q4/23 dividend this methodology is no longer viable, and so we now use peer group valuation. Peer group valuation performed using data as of 19 December 2023 produces a valuation for the DEC share of GBp3,789. At a 20% discount to the peers, this figure becomes GBp2,560.