German Elections Outcome Is Positive for RWE and E.On

Germany’s election outcome closely reflects the polling results and is in line with our expectations, with the CDU winning the vote and the SPD retaining sufficient seats to allow for a two-party coalition. While the higher share of seats won by the far-right AfD may limit the CDU’s ability to execute on its manifesto, the conclusion of the elections provides some certainty that is positive for no-moat RWE and narrow-moat E.On. Both are up by about 3% at time of writing on Feb. 24, outperforming the DAX that is up by 0.8%. We confirm our fair value estimates of EUR 48 for RWE and EUR 17 for E.On, offering a material upside for both.