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Investing.com -- UBS has initiated coverage of Grenergy Renovables SA (BME:GREG) with a “buy” rating and a €95 price target, citing a turning point in the economics of stand-alone battery storage projects. At the current price of €65, the brokerage sees about 50% upside.
Grenergy, a Madrid-based renewable power producer, focuses on solar and batteries. It has a pipeline of 12.5GW of solar and 78GWh of battery storage, with about half of the expected additions through 2027 already contracted.
The company plans to deliver 4.4GW of gross solar capacity and 19GWh of batteries by 2028, with an emphasis on both build-to-own and build-to-sell strategies.
UBS said Grenergy could account for roughly 2% of global battery additions outside China through 2028.
The analysts highlight that capital expenditure on utility-scale batteries has fallen by about 50% in the past two years. At the same time, intraday power price spreads in Spain, Germany and other markets have widened, improving project profitability.
UBS’s model estimates a 10% internal rate of return for stand-alone batteries at a €70/MWh spread and capex of €0.14m/MWh. Ancillary services and tolling agreements offer further revenue potential.
UBS forecasts revenue rising from €293 million in 2022 to €1.02 billion in 2029. EBIT is expected to increase from €30 million in 2022 to €436 million in 2029, with margins improving from 10.2% to 42.8% over the same period. Net earnings are projected to grow from €10 million in 2022 to €210 million in 2029.
Earnings per share are forecast to climb from €0.36 in 2022 to €7.78 in 2029, implying a compound annual growth rate of 29% between 2024 and 2029, well above the sector average of 8% and peers at 11%. Return on invested capital is projected to rise from 5.9% in 2022 to 10.8% in 2029.
The analysts expect no dividends over the forecast period. Equity free cash flow yield remains negative through 2029, reflecting heavy investment, with a decline of 16.4% in 2022 worsened to a decline of 26.4% in 2029
Net debt is forecast to grow from €340 million in 2022 to €3.25 billion in 2029, with net debt-to-EBITDA peaking at 9.1x in 2026 before easing to 4.8x in 2030.
UBS notes most of the debt is non-recourse project financing, with asset rotation providing flexibility.
At a share price of €65 on Aug. 28, Grenergy trades at 21.7x estimated 2025 earnings, falling to 8.4x by 2029. EV/EBITDA multiples move from 13.5x in 2025 to 8.1x in 2029.
UBS said that by 2028 the company trades at a roughly 40% discount to renewable peers. The €95 target price is derived from a sum-of-the-parts discounted cash flow model, valuing existing capacity at €0.6b and the pipeline at €2.8b.
UBS said the market currently values only Grenergy’s existing capacity, contracted projects, and flagship solar-plus-storage developments, while assigning no value to its stand-alone battery opportunities.
The analysts see the company’s early-mover position in batteries and diversified portfolio as drivers of growth beyond what is priced in today.