E.On Earnings: 2023 Guidance Raised on Positive One-Offs; Shares Fairly Valued

We confirm our EUR 11 fair value estimate after no-moat E.On EOAN prereleased solid first-half results, notably thanks to positive one-offs driving a raise in the 2023 guidance. Final results will be released on Aug. 9. Shares appear fairly valued.

First-half EBITDA increased by 40% year on year to EUR 5.7 billion. During the second quarter, EBITDA growth accelerated to 51% from 30% in the first quarter. First-half adjusted net income jumped by 63% to EUR 2.3 billion.

Customer solutions’ EBITDA surged by 127% to EUR 1.49 billion during the second quarter, accelerating from a 97% rebound in the first quarter. The business was boosted by lower sourcing costs in the wake of the energy crisis easing. This is a temporary tailwind as reduced sourcing costs will have to be given back to customers through tariff cuts in the future. Moreover, we suspect that in line with Iberdrola and Centrica, the U.K. customer solutions branch was boosted by the recoupment of incremental costs not covered by the regulated standard variable tariffs in 2021 and 2022.

Networks’ EBITDA increased by 32% in the first half and 34% during the second quarter. The division was also supported by temporary effects, more probably the recovery of network losses during 2021-22.

E.On raises its 2023 adjusted net income guidance by 10% from EUR 2.3 billion-EUR 2.5 billion to EUR 2.7 billion-EUR 2.9 billion. We will raise our EUR 2.52 billion estimate on the first-half positive one-offs. Consequently, the impact on our long-term estimates and valuation will be limited.