Investors have welcomed the Plan that Hera’s management presented on 23 January 2025. Since then, shares started a rally that led the price to approach 4 euro – a level representing a five-year high. The wide overperformance achieved vs. the index of Italian utilities shows that the Company-specific component was a fundamental driver in nurturing the rise.  

Hera has characteristics that are particularly attractive in a phase of great uncertainty in the external scenario, given its low risk profile and the ability to deliver growing results regardless of the macroeconomic variables, the regulatory framework and the evolution of the competitive environment. Being a purely domestic player also meets the favour of investors in the face of the tariff war that is destabilising the operating scenario for multinational companies.

Hera continues to show robust performance against benchmark indices, even though the prospects for M&A in the banking sector have fueled a conspicuous recovery of the FTSE MIB in recent weeks. Moreover, the outperformance of the stock compared to the Italian utility sector index remains very strong.
In the meantime, today the picture is enriched by new features, which will encourage a reconsideration on the valuation of Hera stock. Preliminary 2024 figures indicate that the Group exceeded consensus expectations, achieving, in the first year, a very convincing execution of the 2023-2027 Plan that the new management had presented in January 2024.

Hera continues to overperform its benchmark indices, despite the recent reversal, started after the share price reached the year-high at 3.7 euro in mid-October.
The solid fundamentals, again proved by nine-month results, provide strong support also prospectively. To date, Hera has already offered a Total Shareholder Return of 12%, which is almost twice the annual average indicated in the Plan, considering that a 4% dividend yield adds up to an Earnings per Share growth of more than 20% over the first nine months of 2023.

Due to solid fundamentals, confirmed by healthy half-year results, Hera strengthens the visibility of further returns to offer to shareholders, who have been rewarded at the end of last June with the distribution of a dividend of 14 euro cents. On top of the dividend yield, the shareholder return includes a price increase of nearly 20% year-to-date that has led the stock to outperform all benchmark indices.
Lately, the market sentiment on European utilities is improving, as they trade at very attractive price-earnings levels, now below both the market average and their own historical average.

The first-quarter 2024 report released today enhances the visibility of Hera’s ability to deliver an attractive return to its shareholders: the profitability growth, as measured by both ROI and ROE, supports an EpS increase of more than 12%, which is also matched by a dividend yield of around 4%. Shareholders will receive a payment of 14 eurocents on 24 June, as resolved by the Shareholders’ Meeting held on 30 April.
With the 2023-2027 Plan presented in January, management has outlined a clear path of continuous improvement in profitability over time as well as a dividend distribution policy that reflects the expected progress in earnings. Therefore, the prospect of attractive shareholder remuneration goes beyond the healthy results of the quarter, with an extension to the perspectives of the coming years.

The presentation of the 2023-2027 Business Plan, held on 24 January 2024, gave further boost to the uptrend that the Hera stock started in early October 2023. At recent prices around 3.3 euro, the share price has increased by more than 30% since last autumn’s low; nonetheless, an attractive gap of around 15.5% remains against the consensus target price.
Following the release of the new Plan, the brokers in the share coverage revised their estimates upwards and consequently updated their evaluations on higher levels. Therefore, despite the significant rise achieved by the share price in the meantime, there is still a large room to be filled, given the remaining undervaluation.

The rally that Hera’s shares have experienced since last October has only partly covered the wide appreciation room against the average target price of analysts in coverage – currently at 3.53 euro.
Preliminary results for the Year 2023, above market expectations, will provide further visibility on management’s actual ability not only to hit strategic targets, but to achieve them well in advance. The presentation of the new Plan, which gives stronger impulse to growth through a broad investment plan, will make the extent and quality of future cash generation even clearer, while risk profile remains under control.

The last three months have seen an unfavourable scenario for equity investment: interest rates rising steadily, reaching 20-year peaks; the Chinese economy afflicted by persistent weakness; and, on 7 October, the outbreak of war in the Middle East, which exacerbated geopolitical tensions. The indices thus showed a volatile trend. The performance of Hera’s shares reflected this market sentiment: multiples have therefore not yet discounted the brokers’ upward revisions to estimates after half-year results.
As the end of the Central Banks’ aggressive cycle of interest rate rises approaches, the general market sentiment is starting to become less uncertain, especially looking ahead to 2024…

While the major European stock markets are at their highs since the beginning of the year, Hera’s share price still has significant room for appreciation, as reflected by the large discount to the average target price of 3.4 euro of the analyst coverage.

Despite the good performance that the share price has put in compared to the 2022 year-end price of 2.53 euro, and despite the 5% yield of the 2022 dividend paid in June, Hera can offer further satisfaction to shareholders, according to Jens Klint Hansen, Hera’s Director in charge of Investor Relations, whom we interviewed.

In a stock market seeking direction, due to uncertainties about when central banks will end their tightening monetary policies, a bullish movement of Hera stock started in recent weeks.

Fuelling the rally, in addition to the healthy FY 2022 results, is the stock’s defensive profile, appreciated by portfolio managers in this de-risking phase, after the difficulties of several banking institutions emerged.