Citi ups Neoen to 'neutral' on 'more reasonable' valuation

Neoen SA

29/08/2023 10:49

** Citi Research raises French renewables company Neoen
 NEOEN.PA  to "neutral" from "sell" on valuation grounds but
flags FCF concerns
    ** "Recent share price de-rating makes valuation more
reasonable," says the brokerage
    ** It notes that following a recent capital raise, the
company's balance sheet has improved but remains high vs
renewables peers
    ** Neoen in March launched an about 750 mln euro ($811.28
mln) rights issue to increase its installed capacity and to
intensify investments in storage facilities
    ** It targets 10 GW of operating and under construction
assets by 2025, and 20 GW by 2030, according to Citi
    ** The brokerage expects the balance sheet to remain in
focus post capital raise, with an estimated net debt-to-EBITDA
ratio at 6.1x for 2023 vs peer average of 3.6x
    ** "We believe that in the next years the company will
struggle to see significant benefit on the FCF from fully
operational fleet to meaningfully de-lever the company and fund
growth," Citi adds
    ** Out of 13 analysts that cover Neoen, five rate the stock
"strong buy" or "buy", ​seven "hold", and one "strong sell"

($1 = 0.9245 euros)

 (Reporting Clement Martinot)
 ((Clement.martinot@tr.com))