RWE: Tops Expectations in 2023; Guides for the Lower End of Its 2024 Guidance; Shares Cheap

We confirm our EUR 55 fair value estimate after no-moat RWE’s 2023 preliminary earnings largely exceeded its guidance and company-compiled consensus for the fourth year in a row. On the downside, the firm said it expects to reach the lower end of its 2024 guidance because of the recent fall in European wholesale power prices. This sent the shares down by 6% on Jan. 26 as the market has been used to multiple guidance upgrades since 2019. Still, we believe RWE could continue to surprise on the positive side in 2024 due to persisting commodity price volatility driven by the growing share of intermittent renewables. RWE is long-volatility thanks to its high-performing trading business and its combined cycle gas turbines. All in all, shares look materially undervalued.