NATUREL ENERJI: Sunny days ahead
TEB Invest: We initiate coverage on Naten with a BUY rating and target price of TRY11.0, which offers an attractive 67% upside from current levels
First listed solar energy company in Turkey
Renewable energy investments have assumed an important role for the Turkish government to meet rising electricity demand, reduce import dependence for energy, and strengthen the country’s energy security. We think the government’s thrust on renewable energy investments will continue uninterrupted in ensuing years.
A player in the renewable energy sector, Naturel Enerji (Naten) develops and operates solar power plants with an installed capacity of 21.7MWp as of 30 September 2019. The company also offers engineering, procurement, construction (EPC) services to its clients. It completed its IPO on 8 August 2019 and received cash proceeds of TRY46m, to be utilised for capacity enhancement projects.
Capacity to quadruple by 2021
We expect Naten’s capacity to quadruple to 100MW from the current of 21.7MW by mid-2021 as the company is well-positioned to incur capex of USD78.3m. Consequently, we forecast its electricity generation EBITDA to increase at a CAGR of 152% over 2018-2021.
EPC unit to take off steered by demand for rooftop installations
Owing to a jump in electricity prices, introduction of the net metering scheme and a decline in installation costs, the feasibility of rooftop solar investment for an industrial facility has improved significantly in the last 1.5 years, which we believe will boost rooftop installations going ahead. We expect Naten’s EPC EBITDA to rise at a CAGR of 161% over 2018-21, led by the jump in rooftop installations, mini YEKA projects and YEKDEM expiry rush.
Initiate coverage with a BUY
We initiate coverage on Naten with a BUY rating and target price of TRY11.0, which offers an attractive 67% upside from current levels. Also, in terms of 2020E P/E and EV/EBITDA multiples, Naten trades at 64% and 11% discounts, respectively, to those of its international peers. Considering the expected lucrative growth figures (revenue/EBITDA/net profit CAGRs of 149%/152%/92% over 2018-21) in the next three years, we believe that let alone deserving a discount, the stock should even trade at a premium to peers.
By Mr Kurthan Atmaca, TEB Invest/BNP Paribas