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AGL Energy Ltd AGL

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Economic Moat




Solid Fiscal 2020 but AGL Energy's Guidance Disappoints, FVE Reduced 10%

Adrian Atkins Senior Equity Analyst

Analyst Note

| Adrian Atkins |

Narrow-moat AGL Energy reported fiscal 2020 underlying net profit after tax of AUD 816 million, down 22% on last year and in line with our expectations. But guidance was very well below our expectations. Management guided to underlying NPAT of between AUD 560 million and 660 million in fiscal 2021. We downgrade our forecast 21% to AUD 620 million. Considering 2021 is expected to include an insurance payout of up AUD 100 million to cover a past power station outage, we think NPAT is likely to fall again to about AUD 524 million in fiscal 2022. That represents a halving of profit since the 2018/2019 peak. Thereafter, we forecast NPAT recovers at a low-teen percent per year on average through to fiscal 2025, driven by tightening electricity markets. We downgrade our fair value estimate 10% to AUD 18 per share and consider the stock modestly undervalued at current prices.

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Company Profile

Business Description

AGL Energy is one of Australia's largest retailers of electricity and gas. It services 3.7 million retail electricity and gas accounts in the eastern and southern Australian states, or about one third of the market. Profit is dominated by energy generation, underpinned by its low-cost coal-fired generation fleet. Founded in 1837, it is the oldest company on the ASX. Generation capacity comprises a portfolio of peaking, intermediate, and base-load electricity generation plants, with a combined capacity of 10,500 megawatts.

200 George Street, Level 24
Sydney, NSW, 2000, Australia
T +61 299212999
Sector Utilities
Industry Utilities - Renewable
Most Recent Earnings
Fiscal Year End Jun 30, 2021
Stock Type
Employees 3,358