ABO Energy — Global growth generates record net profit

Research: Industrials

ABO Energy — Global growth generates record net profit

ABO Energy reported strong financial results for FY23, as revenue grew by 29% y-o-y to €300m and net profit increased by 11% to €27.3m. Revenue growth was partially driven by a substantial increase in billed construction services, which totalled €154.6m, up from €96.2m the previous year. Additionally, management has proposed a 11% increase in the dividend to €0.60 per share.

Written by

Harry Kilby

Analyst

Industrials

ABO Energy

Global growth generates record net profit

Renewable energy

QuickView

17 April 2024

Price

€54

Market cap

€498m

Share price graph

Share details

Code

AB9

Listing

Xetra

Shares in issue

9.22m

Business description

ABO Energy is a Germany-based renewable energy infrastructure company, founded in 1996, which is engaged in the development and construction of wind and solar projects, battery and hybrid energy systems and hydrogen projects worldwide. In October 2023 the company changed its name from ABO Wind to ABO Energy to better reflect its growth in relation to technology and the new KGaA legal structure. It is expected the full company will formally complete the name change by May 2024.

Bull

Continued diversification of its portfolio in terms of technology and geography.

Large growth pipeline.

Issue of green corporate bond with net proceeds of up to €48m, which will fund current and future renewable energy projects.

Bear

Volatile power price markets.

General negative sentiment from investors towards renewables.

Revenue from future projects subject to regulation and potential delivery delays.

Analysts

Harry Kilby

+44 (0)20 3077 5724

Andrew Keen

+44 (0)20 3077 5700

ABO Energy reported strong financial results for FY23, as revenue grew by 29% y-o-y to €300m and net profit increased by 11% to €27.3m. Revenue growth was partially driven by a substantial increase in billed construction services, which totalled €154.6m, up from €96.2m the previous year. Additionally, management has proposed a 11% increase in the dividend to €0.60 per share.

Accelerating growth

ABO Energy’s pipeline consists of around 900 projects, with a nominal total capacity of 23.1GW (65% wind, 30% solar, 25% battery), under development or construction in 16 countries. Significant progress in its growth strategy was achieved during the year, with the company winning a recent tariff tender in France for four wind farms with a combined capacity of 57.5MW. It also won bids for four solar parks and two wind farms in Germany with a total capacity of 50MW and 22MW, respectively. The company continued to diversify its global portfolio, both in terms of technology and geography, through the development of solar projects in Colombia and Hungary, with a combined capacity of 10MW and 90MW, respectively.

Navigating the volatile power price environment

ABO Energy is taking steps to navigate the volatile power price market by securing power purchase agreements (PPAs) with its offtakers. For example, a French industrial company has secured the electricity from one of ABO Energy’s solar farms currently under construction. ABO Energy has also signed PPAs with a US internet company for the nearly commissioned Finnish 30MW wind farm and 50MW Spanish solar park, currently under construction. These two projects will supply roughly 100GWh of renewable energy per year over a 10-year period.

Valuation: Undervalued based on consensus

Consensus forecasts indicate steady growth over the coming years both in revenue and net income, which is in line with management guidance. Management has stated that it expects to see significant growth in the coming years, aiming for net PBT of €50m in the medium term. ABO Energy’s consensus P/E ratio for FY24e is 18.5x, broadly in line with the average of its peer group. Consensus also sees ABO Energy’s stock price as undervalued, with the average target price almost double the price at which it currently trades.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

231.7

38.2

2.67

0.54

27.8

0.73

12/23

299.7

41.8

2.96

0.60

13.9

1.46

12/24e

321.3

46.8

2.95

0.61

18.5

1.12

12/25e

360.9

51.9

3.27

0.66

16.7

1.21

Source: LSEG

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. Where Edison has used consensus estimates within this publication, we do not guarantee their accuracy or completeness.

Exclusion of liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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