Redeia Only Just Misses Expectations

We are currently maintaining our fair value estimate of EUR 16.50 for no-moat Redeia RED as we roll our model to incorporate fiscal full-year results. Redeia slightly missed PitchBook’s EBITDA median consensus of EUR 1,510 million for fiscal 2022 by ending the year with EUR 1,491 million. This was also a small decrease of 0.5% versus fiscal 2021 as the tariff orders reduced EBITDA by EUR 35 million in 2022.

As expected, the 2022 dividend will be EUR 1 per share despite profit decreasing 2.3% year over year to EUR 665 million. Management has reiterated the intended dividend floor of EUR 0.8 per share in 2024 and 2025. We currently view shares as fairly valued.

The TSO segment’s EBITDA fell by 5.4% year over year. This business accounts for 76% of EBITDA, so it dragged down the group’s EBITDA despite growth of 78% in the International segment, 11% in the satellite segment, and 2% in the fibre optics segment. The main driver for the international and satellite segments’ growth in 2022 were acquisitions.

For fiscal 2023, management is guiding for an EBITDA greater than EUR 1,500 million and net profit approximately in line with 2022. This guidance includes growth from the acquisitions and scheduled satellite activities. This is roughly in line with our estimates. Redeia began on the Chira-Soria reversible hydroelectric power plant and investments are expected to grow to over EUR 700 million for the TSO segment in 2023, returning to levels closer to what was seen in 2010 and 2011. Redeia’s management reiterated its previous financial efficiency targets and increased its capital expenditure target for TSO by 10%.