E.On Earnings: 2023 Guidance Conservatively Maintained After Strong Results; Shares Fairly Valued

We confirm our EUR 11.40 fair value estimate after no-moat E.On EOAN released solid 9-month results and maintained its 2023 guidance, which looks too conservative to us. Shares appear fairly valued.

Nine-month EBITDA increased by 27% year on year to EUR 7.8 billion. During the third quarter, EBITDA growth slowed down to 3% on a higher comparison basis. Nine-month adjusted net income jumped by 38% to EUR 2.9 billion.

Customer solutions’ 9-month EBITDA more than doubled, maintaining the first-half trend and boosted by the same drivers, that is higher margins thanks to tariff hikes and lower procurement costs than last year in the wake of the easing of the energy crisis. Networks’ 9-month EBITDA increased by 32% thanks to regulated asset base growth and lower redispatch costs. Looking at the third quarter, networks’ EBITDA decreased by 2% due to a higher comparison basis.

E.On confirmed its 2023 EBITDA and adjusted net income guidance of EUR 8.6 billion-EUR 8.8 billion and EUR 2.7 billion-EUR 2.9 billion, respectively. It looks too conservative as the 9-month net income stood at EUR 2.9 billion. The firm highlights that the tariffs cut to pass through lower wholesale commodity prices to retail customers in the fourth quarter will significantly hit earnings. It adds that the guidance incorporates a buffer of around EUR 300 million for potential deterioration in the energy market environment by the end of the year. All in all, we maintain our 2023 EBITDA of EUR 9.4 billion, implying a 15% decline in the fourth quarter and our EUR 3.4 billion net income estimate.

Economic net debt amounted to EUR 34.2 billion at the end of September, EUR 2.8 billion lower than at the end of June as investments were largely funded by an operating cash flow of EUR 3.9 billion, EUR 500 million higher than in the year-ago quarter.