Société Générale a repris le suivi d’EDF avec un avis « achat » et un objectif de cours de 20 euros (soit un potentiel de hausse de 46%), la banque estimant qu’une clarification de l’évolution des tarifs de l’électricité clarifiera la perspective d’évolution des résultats de l’énergéticien.
Le titre souffre également d’une forte décote de valorisation par rapport à son secteur (24%), estime SocGen. La banque estime que le dividende sera coupé à 1 euro, ce qui représente un rendement de 5% et reste supportable pour les finances du groupe.
A noter que le titre, en hausse de près de 4% ce matin, profite également de l’annonce par Bercy de l’engagement de résorber le déficit de couverture des charges de service public de l’électricité – dont le manque à gagner pour EDF est estimé à 5 milliards d’euros…
« What’s the story France’s nuclear fleet is aging. €394bn is needed by 2030 to build new capacity and renew EDF’s entire nuclear fleet (in 20 years). This would be €361bn if a mix of gas and renewables is chosen. Either way, tariffs in France would need to rise substantially to finance all this. A mid-point solution is more likely and consists of extending the life of existing assets, with such a solution costing ‘just’ €125bn. For this to happen tariffs would have to rise by at least the rate of inflation, which would barely ensure that EDF’s free cash flow breaks even. However, to justify EDF’s current share price, one needs to assume tariffs will fall, not rise, and we do not think this is a reasonable assumption. Also, this implies that EDF’s nuclear fleet is worth €100/kW, which is well below peers (i.e. Germany and Spain), whose nuclear assets are older and heavily taxed.
What will drive a rerating The FY12 results are to be announced on 14 February, and we see a potential 20% cut in consensus EPS, based on our conservative outlook. We have adjusted our DPS to €1.0 in 2013e and 2014e based on a 65% payout ratio. As an offset, we think the market (in part) expects this, and a solution to the renewables tariffs deficit (CSPE) could be announced soon. By this summer we expect the outcome of the government’s Energy Transition debate to provide more clarity on future tariff increases, and hence on EDF’s earnings and dividends.
Equity recommendation We initiate coverage of EDF with a Buy rating and a target price of €20. The stock trades at a 2013e P/E of 9.1x which represents a 24% discount to the sector. Assuming the dividend is indeed cut to €1.0, our TP would still correspond to a dividend yield of 5%, which we believe is not challenging. We would expect the stock to rerate as more certainty on the dividend is given at the FY results. For our Sum-of-parts model see valuation section inside.
TP Risks: A higher than expected increase in nuclear provisions or a decrease in tariffs on the back of the recent challenges facing the TURPE3 would hurt sentiment and hinder a rerating. However, we believe this is unlikely (details in report).
Credit recommendation by SG Credit analyst Herve Gay While we do not expect this to materially challenge EDF’s strong access to liquidity at a low funding cost, we anticipate a deterioration in the company’s credit metrics. As a result, we downgrade our fundamental credit opinion to Negative from Stable. We move to Hold from Buy on the EDF €22 given our expectation of €8bn in new issues for 2013 but maintain our Buy on the EDF $18 and our Neutral recommendation on the CDS. »