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.

After the presentation of the Business Plan to 2026 on 8 February 2023, with today’s release of FY22 results, Hera does provide investors with additional confirmation of the founding elements of its equity story.
To some extent, analysts have already built in their valuations the features of Hera’s continued growth, achieved by carefully managing the risks of the external scenario. As of 20 March 2023 – before the 2022 annual results are known – brokers have a mean target price of 3.24 euro, over 30% above recent trading prices.

Despite the recovery from last October’s lows, the price level at which the Hera stock is trading indicates that there is still a considerable gap to fill compared to the FTSE MIB performance and the average share target price of the analyst coverage, today at 3.6 euro.

The release of the preliminary 2022 results will provide evidence on the profitability recovery in the Energy area in Q4, together with a declining leverage. Thus, the market will have new elements to update the valuation of Hera stock. Investors will also be able to draw reassuring elements on the solid profile of the future growth from the targets of the new Plan to 2026, set in continuity with past strategy.

Despite the rebound that started in the second decade of October, equity markets are still currently bearish, while showing significant losses compared to their levels at the beginning of the year. The general picture remains dominated by deep geopolitical tensions, a particularly severe energy crisis in Europe – where a coordinated reaction among the various EU countries has been lacking – and restrictive monetary policies which, although aimed at slowing inflation, make the profile of economic growth uncertain.

Equity markets suffered heavy losses in the first half of this year, against a backdrop of geopolitical tensions, tightening monetary policies aimed to fight inflation, and deep uncertainty on the evolution of the real economy.
The performance of Hera’s shares could not remain immune to such daunting picture for equity investment, despite the Group’s resilient business model has proven to ensure solid fundamentals over the years, with continuous and sustainable growth over time.

In early 2022, the stock market’s performance has been heavily affected by a combination of negative factors, whose future evolution is difficult to predict.

Geopolitical tensions, inflation, and rising interest rates, all weigh on the economic growth outlook.

In this context, Hera stock outperformed both the FTSE MIB and the Italian utilities index.

Hera’s share continues to benefit from the high quality of its fundamentals and the visible growth perspectives, given the presence in the Group portfolio of businesses that are regulated or enabling the circularity and the energy transition. As a result of these unique features and benefitting from proactive investor-engagement initiatives, Hera has strongly outperformed the sector index.   

Hera’s equity story represents a safe harbour for investors. It represents a 20-year uninterrupted growth story, with strong protection against the risks of today’s scenario, which is characterised by many uncertainties: inflation, unstable energy prices, interest rates expected to rise, geo-political conflicts and ongoing pandemic.

The new Plan to 2025 expresses a clear equity story, based on the growth acceleration of both EBITDA and Earnings per Share. It also leverages the high visibility of the factors that drive an increasingly green path.
Investors will have new elements to evaluate the Hera stock, starting from the 2025 targets, which also envisage a higher remuneration through dividends following higher expected earnings, while the financial profile remains solid.

The utilities sector is certainly not one of the sectors that investors have favoured during 2021; nevertheless, Hera shares have performed well since the beginning of the year, leveraging the generally positive tone of the stock markets and a number of Company-specific factors that have boosted the share price.