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Investing.com -- Morgan Stanley raised its rating on Redeia (BME:REDE) to “overweight” from “equal-weight,” saying the company’s shares have already priced in regulatory pressures and risks linked to the recent Iberian blackout.
Shares of the electricity and telecommunications infrastructure operator were up 2.2% at 06:38 ET (11:38 GMT0.
The analysts said Redeia’s underperformance of roughly 15% this year compared with electricity network peers and more than 10% against Spanish rival Enagas leaves room for a re-rating as investors turn attention to growth prospects and funding stability .
“We see Redeia as one of the best electricity networks growth stories in European utilities,” the analysts wrote, pointing to a projected rebound in regulated asset base expansion after years of decline.
The base is expected to grow at an 8% compound annual rate through 2030, compared with a 1% contraction between 2019 and 2024.
Transmission capex is forecast to rise from €1.1 billion in 2024 to €1.7 billion by 2027, with net RAB plus work in progress projected to reach €12.4 billion in 2027 .
The bank described 2025 as an earnings inflection point. Reported earnings per share are estimated at €0.92 in 2024, increasing to €0.96 in 2025, €1.04 in 2026 and €1.11 in 2027.
“We believe Redeia’s net income is past its trough and expect a rebound in 2026 as a result of improved regulation (although not as much as we had hoped) and as capex starts contributing to growth,” the report said.
Morgan Stanley projected about 7% annual EPS growth between 2024 and 2030, above the 6% sector average.
EBITDA is forecast at €1.2 billion in 2024, rising to €1.4 billion by 2027. EBIT is projected to grow from €761 million in 2024 to €944 million in 2027.
Net income is expected to climb from €499 million in 2024 to €597 million in 2027, while dividends per share are forecast at €0.80 in 2024 and 2025, €0.83 in 2027 and €0.93 in 2028. Dividend yields are expected to remain around 4.8% to 4.9% .
On financing, the brokerage noted that “funding overhang is behind us thanks to the recent Hispasat disposal.”
Redeia’s funds from operations to debt ratio is forecast at 16%, slightly below the A- threshold under S&P’s methodology, but the analysts said flexibility exists through hybrid issuance, asset disposals or accepting a lower rating. Net financial debt/EBITDA is projected at 4.4x in 2025, easing to 4.1x in 2028 .
Valuation was also central to the upgrade. Morgan Stanley said Redeia is “not as expensive as it looks,” noting that while its P/E multiple for 2027 is 16x compared with peers at 14x, the premium reflects lower gearing risk.
On EV/EBITDA, the company trades in line with peers at 11x. The bank maintained its €19 price target, representing about 15% upside from the September 2 close of €16.23 .
Analysts flagged Redeia’s position within the sector, “Redeia is now one of our preferred network stories together with SSE, Elia and Italgas. In Spain we prefer it to Enagas and Endesa,” the brokerage said.
The report projected total shareholder return of 13% between 2025 and 2030, compared with 10% for peers.