Renewables Expansion To Exceed 1 Gigawatt Will Strengthen Future Prospects

Key Takeaways

• Growth in renewables and premium product marketing are key to driving higher revenue and long-term earnings.
  
• Strategic resolutions and potential asset divestment could enhance operational focus and financial standing.
  
• Challenging refining margins and renewable market pressures threaten future revenue and net margins, while EU legislation and strategic uncertainties add financial strain.

Catalysts

Operates in the energy sector primarily in Greece, the Southeastern Europe, and the East Mediterranean.

• The refining margin environment is expected to improve, with margins trending $2 to $3 higher on average than in the third quarter, which could positively impact earnings and adjusted EBITDA.
  
• The increased market share and penetration of premium products in domestic and international marketing are likely to drive higher revenue and better net margins.
  
• Growth in the renewables segment, with plans to exceed 1 gigawatt of operating capacity by early 2026, suggests a positive impact on revenue and a strategic shift that could enhance long-term earnings.
  
• The resolution of business strategies with Elpedison and potential portfolio streamlining in power and gas could lead to improved operational focus and potentially convert assets into higher cash flows.
  
• The potential exit from DEPA or alignment with controlling interest strategies may unlock value and provide better financial standing through asset divestment or improved operational efficiency.

HELLENiQ ENERGY Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming HELLENiQ ENERGY Holdings's revenue will decrease by -5.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.2% today to 2.3% in 3 years time.
• Analysts expect earnings to reach €248.8 million (and earnings per share of €1.26) by about January 2028, up from €27.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €436 million in earnings, and the most bearish expecting €101.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.1x on those 2028 earnings, down from 84.2x today. This future PE is lower than the current PE for the GB Oil and Gas industry at 14.0x.
• Analysts expect the number of shares outstanding to decline by 13.61% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.48%, as per the Simply Wall St company report.

HELLENiQ ENERGY Holdings Future Earnings Per Share Growth

Risks

• The recent quarter experienced one of the worst refining margin environments in years, negatively affecting third-quarter results, which could impact future revenue and earnings.
  
• Delays in the connection of new renewable projects could hinder progress towards renewable energy targets, potentially impacting future revenue streams from these investments.
  
• An enforced solidarity contribution as part of EU legislation affected financial results and might impact net margins if recurring or expanded.
  
• The potential sale of DEPA shares and restructuring discussions could lead to uncertainties in strategic priorities, possibly impacting future earnings.
  
• Competitive pressures and oversaturation in the renewable energy market could lead to increased curtailment and impact market pricing, affecting future revenue and net margins.

Valuation

• The analysts have a consensus price target of €7.66 for HELLENiQ ENERGY Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €8.8, and the most bearish reporting a price target of just €6.2.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €11.0 billion, earnings will come to €248.8 million, and it would be trading on a PE ratio of 9.1x, assuming you use a discount rate of 14.5%.
  
• Given the current share price of €7.47, the analyst's price target of €7.66 is 2.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.