How are energy investors positioned?
Investing.com - JPMorgan has upgraded AGL Energy Ltd. (ASX:AGL) (OTC:AGLNF) from Neutral to Overweight while lowering its price target to AUD11.60 from AUD12.40.
The rating change follows AGL’s FY25 financial results, which aligned with expectations as both EBITDA and NPAT hit the mid-point of guidance. Net debt exceeded forecasts due to weaker cash flow resulting from a one-off government bill relief program.
JPMorgan noted that AGL’s FY26 guidance came in below expectations, with EBITDA 4% under estimates and NPAT missing by 10%. The shortfall stems primarily from higher depreciation and amortization costs related to ongoing investments in the thermal fleet and batteries, along with increased interest expenses.
The firm expects D&A to remain structurally higher long-term, which will impact NPAT and potentially reduce shareholder distributions. Despite these challenges, JPMorgan highlighted AGL’s strong operational performance and projected earnings growth through the decade.
With AGL trading at 4x forward EV/EBITDA and management indicating that battery earnings will more than offset coal contract impacts at Bayswater in 2028, JPMorgan views the current valuation as presenting an attractive risk-reward opportunity.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.