Renewable Expansion In The Philippines Will Secure Future Advantage

Key Takeaways

• Rapid expansion in renewables and long-term contracts supports earnings stability, margin growth, and positions the company to capture rising demand for clean energy.
  
• Modernization initiatives and entry into new markets enhance operational efficiency, access to revenue streams, and strengthen competitive positioning.
  
• Flat energy sales, declining contract volumes, weak industrial demand, rising capital requirements, and regulatory uncertainties threaten future growth, profitability, and shareholder returns.

Catalysts

Through its subsidiaries, engages in the power generation and distribution, and electricity retail businesses in the Philippines.

• Ongoing expansion and rapid commissioning of multiple renewable energy projects (solar, wind, and battery storage), with a pipeline targeting 4.6 GW by 2030, positions Aboitiz Power to benefit from the rising demand for clean energy, potentially accelerating long-term revenue growth and shifting its margin profile higher due to lower operating costs.
  
• Sustained economic and population growth in the Philippines, along with trends in electrification (e.g., grid demand from digitalization, industry, and transport), underpin higher long-term electricity demand, supporting both top-line revenue growth in the distribution and generation segments and greater asset utilization.
  
• Aggressive shift toward long-term power supply contracts (aiming for 90% contracted baseload capacity by end-2025) is expected to increase the predictability and stability of future cash flows, reduce exposure to spot market volatility, and sustain healthy net margins.
  
• Modernization of grid infrastructure and entry into new markets (e.g., RES segment growth, potential via aggregation, and expanded franchise areas under discussion) allows Aboitiz Power to access additional revenue streams while raising operational efficiency and net margins over time.
  
• Recent and planned capital deployment is heavily weighted to renewables (65–70% of 2025 CapEx), leveraging falling costs for renewable technologies and robust regulatory/investor support, which together are likely to enhance future earnings growth and bolster the company's long-term competitive positioning.

Aboitiz Power Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aboitiz Power's revenue will grow by 4.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.7% today to 19.0% in 3 years time.
• Analysts expect earnings to reach ₱42.5 billion (and earnings per share of ₱5.57) by about July 2028, up from ₱30.7 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, up from 10.0x today. This future PE is greater than the current PE for the PH Renewable Energy industry at 9.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.78%, as per the Simply Wall St company report.

Aboitiz Power Future Earnings Per Share Growth

Risks

• Despite significant expansion into renewables, overall energy sold was flat year-on-year and bilateral contract sales declined by 11% due to contract expiries and reallocations, suggesting stagnant demand and possible difficulty maintaining revenue growth if contracted volumes do not recover.
  
• Spot market exposure remains a risk, as softening spot prices due to increased grid supply (such as the Iligan expansion) and lower general demand have already led to an 11% decline in Generation segment revenue, with management expecting this trend to continue-potentially impacting future profitability and earnings.
  
• The company's heavy capital expenditure requirements for its renewable pipeline and LNG entry (₱78.1 billion for 2025, much higher than recent years) could pressure free cash flow, increase leverage, and may limit dividend capacity or require further debt refinancing, affecting both net margins and shareholder returns.
  
• Weakness in industrial and commercial electricity demand-particularly in sectors like cement and steel due to broader economic headwinds-has started to impact volume growth in the distribution and RES segments, raising concerns over sustained top-line revenue growth if Philippine GDP growth moderates.
  
• Regulatory and competitive risks persist: approval and timing uncertainties for new retail aggregation rules, potential price competition from new RES entrants, and delays in regulatory rate resets or project permitting (e.g., distribution utilities and pending franchise expansions), all of which could compress margins, delay asset monetization, or limit revenue expansion.

Valuation

• The analysts have a consensus price target of ₱46.385 for Aboitiz Power 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 ₱60.0, and the most bearish reporting a price target of just ₱30.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₱223.8 billion, earnings will come to ₱42.5 billion, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 13.8%.
• Given the current share price of ₱42.5, the analyst price target of ₱46.38 is 8.4% 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.