Morgan Stanley prefers Fortum to Verbund in utilities; initiates coverage

VERBUND AG

09/08/2023 12:10

** Morgan Stanley initiates coverage of Finnish energy
company Fortum  FORTUM.HE  at "overweight"; says co's hydro and
nuclear fleet is a key beneficiary of higher power prices and
volatility
    ** However, broker believes current share price implies an
"overly punitive" long-term power price
    ** Sees Fortum shares screening attractively on a dividend
yield basis, offering 8.2% in 2024
    ** Sees Fortum as attractively valued, unlike Verbund
 VERB.VI  
    ** Cuts Verbund to "underweight" from "equal-weight",
deeming the Austrian utility's stock as expensive, with
heightened investment risks in its renewable growth strategy
    ** Also flags Verbund's heightened execution risk in
renewables growth ambitions 
    ** Cites Verbund's acquisition of wind power plants in
Spain, deeming it paid above sector average levels and allows
for little value creation without use of hybridisation or
repowering
    

 (Reporting by Tristan Veyet and Elviira Luoma)
 ((Elviira.luoma@thomsonreuters.com ;
Tristan.chabba@thomsonreuters.com))