First Berlin Equity Research has published a research update on PNE AG (ISIN: DE000A0JBPG2). Analyst Dr. Karsten von Blumenthal downgraded the stock to REDUCE but increased the price target from EUR 10.00 to EUR 11.50.
PNE had a successful 2021. Based on strong project sales and much higher power generation revenue, the company increased EBITDA by 24% y/y to €32.7m, which was slightly above the upper end of the €24m – €32m EBITDA guidance and our forecast. In 2021, PNE sold projects with a capacity of >770 MW/MWp, and expanded its wind and PV project pipeline by 1 GW to 6.9 GW (+16% y/y). The company’s internally operated wind farm portfolio rose by 98 MW to 233 MW (+42% y/y). The strategy to focus on the portfolio expansion currently yields a „double dividend“: The portfolio generates stable long-term cash flows (feed-in tariffs for 20 years) and extra profits due to the high German power prices. Average feed-in tariffs of above 60 €/MWh and average monthly onshore wind power market values between 108 €/MWh and 198 €/MWh in Q1/22 mean that the Electricity Generation segment generated ca. double to triple the „normal“ revenue. For 2022, PNE is guiding towards EBITDA of €20m – €30m. This may sound a bit disappointing, but it has to be kept in mind that all the German wind farm projects under construction (132 MW) are earmarked for the own plant portfolio. This means that PNE cannot book sales & earnings from selling these wind farms. Instead, these profits will be split over the operation period of the turbines (ca. 20 – 25 years). Although we do not assume that the very high power prices will last beyond the duration of the Russian-Ukrainian war, we expect a much higher pricing than between 2012 – 2020, when the power price at the German power exchange was usually between 30 €/MWh and 50 €/MWh. Given longer turbine and module delivery times we have lowered our 2022 & 2023 forecasts. We have revised our sum-of-the-parts valuation and accounted for the expanded project pipeline, the high power prices, and the higher interest rate for riskless bonds. This results in a new price target of €11.50 (previously: €10.00). Following the recent share price appreciation we downgrade our rating from Add to Reduce.