Deutsche Bank lifts EDP stock rating, raises target to EUR3.70

On Tuesday, Deutsche Bank (ETR:DBKGn)’s analysts upgraded the stock rating for EDP - Energias de Portugal SA (EDP:GR) from Hold to Buy, adjusting the price target upward to EUR3.70 from the previous EUR3.30. The upgrade was influenced by favorable hydrological conditions in Portugal, which have persisted from the first quarter into the current quarter-to-date. These conditions are anticipated to propel EDP’s Hydro, Clients and EM Iberia segment to achieve the upper end of its EBITDA guidance, potentially reaching around EUR1.2 billion.

The bank also identified a structural opportunity in the Iberian power market that could benefit EDP. This opportunity arises from the company’s ability to provide more ancillary services with its flexible generation assets, especially following a recent blackout in Spain. Such services are crucial for maintaining grid stability and can be a significant source of revenue for power generation companies.

Deutsche Bank further anticipates that EDP will present guidance surpassing market consensus in the coming years. This expectation is set against the backdrop of the aforementioned developments in the Iberian market and the company’s scheduled Capital Markets Day in November. The analysts suggest that the combination of these factors could lead to a more optimistic future outlook for the company.

EDP’s upgraded rating and price target reflect Deutsche Bank’s positive view on the company’s prospects, considering the current and expected market conditions. The bank’s analysis points to a potential increase in EDP’s financial performance and market position, particularly within the Iberian power sector.

In summary, the revised outlook by Deutsche Bank for EDP stock is based on the strong performance of the company’s hydroelectric segment and the potential for increased ancillary service provision. These elements are expected to contribute to a more favorable financial trajectory for EDP in the near term.

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