(BFM Stock Exchange) – Share Engie shows the largest decline in the index CCA 40 on Tuesday, as Bank of America lowered its “underperform” guidance. UBS, for its part, adjusted its price target on the stock, while maintaining its Buy recommendation for valuation reasons.
Engie in the crosshairs on the stock exchange. The energy group shows the largest decline in CCA 40 on Tuesday, reflecting analyst assessments in a more cautious tone. At about 16:00, the title Engie thus yields 4.5% to 12,604 euros, while the CCA 40 progressed very slightly (+0.6%).
The stock is weighed down by a deterioration in Bank of America which lowered its advice by two notches, from “buy” to “underperformance”, with a target price lowered to 12 euros against the previous 19 euros.
The US bank says it appreciates the stock’s good performance last year, which gained nearly 3% while the CCA 40 fell 9.5%, reflecting in particular “excellent risk management and strategic progress [réalisés, NDLR] under the new management team.
A threatened payment relationship?
But the research department believes the stock now has a “negative risk-reward” pair. Bank of America sees three risks to the stock Engie. First, the group may not raise its targets for 2023, the year for which the company had indicated it expected a group share of recurring net income of between €3.2bn and €3.4bn.
But the market has long hoped that the group will raise this range, observes Bank of America, the consensus expects 3.9 billion euros. But due to several elements, notably additional provisions in the Belgian nuclear dossier, the bank believes this will not be the case.
The second risk concerns the Belgian nuclear dossier. Engie announced on 9 January that it had signed an agreement with the Belgian federal government to extend the life of two reactors (Doel 4 and Tihange 3) by ten years. This agreement also defines “the framework for a ceiling on future costs related to the treatment of nuclear waste, a framework that will allow the technical and financial parameters of a ceiling to be frozen in the coming weeks including a risk premium”, he explained later. Engie. Bank of America fears that cap will result in a negative cash impact of about €3 billion for the company. The bank explains that it is based on a previous case in Germany dating back to 2016.
Third risk: Bank of America fears itEngie lowers its currently pegged dividend payout ratio in a range that represents 65% to 75% of the group’s share of net recurring income. Bank of America believes that delivering on this commitment – which would result in a dividend of 1.3 EUR at 1.7 EUR per share – would not be “prudent”. Bank of America retains a dividend of 1 EUR by title, which would allow Engie to save more than 1 billion euros in cash.
For its part, UBS has adjusted its target price on the share to 15 euros against 15.5 euros. The Swiss bank perceives risks to the group’s financial results this year, particularly due to falling gas prices. The Swiss bank also believes that the consensus on 2023 and 2024 results has too high expectations. For these reasons, he believes that the group’s action may come under pressure leading up to the publication of the group’s annual results. However, he confirmed his buy recommendation, deeming the stock cheap.
Julien Marion – ©2023 BFM Exchange