In 2024, electricity consumption is growing in Russia, the US and China. Donald Trump’s victory will support shares of companies in the sector. The market situation allows finding attractive investment options.
Finam analysts conducted a study of the global electricity sector and gave recommendations.
“Inter RAO
The Central Bank’s tight monetary policy is putting pressure on the Russian power sector. However, it does not prevent some companies from growing.
‘Inter RAO is Russia’s largest energy holding company by revenue, with assets in generation, sales and trading. In a high interest rate environment, a large cash pile of 430 billion rubles (105% of the market capitalisation) supports the company’s business.
In the first half of the year, Inter RAO increased interest income by 132.1% year-on-year, with the amount of interest income reaching RUB 40 billion. Net profit for the first six months of 2024 grew by 17.3% to 79.5 billion rubles.
Finam analysts expect that this year dividends may grow by 21.2% to 0.395 rubles per share and bring 10% yield.
Finam analysts recommend BUYing Inter RAO shares with a target price of RUB 4.77 and a growth potential of 22%.
“RusHydro
‘RusHydro is a Russian energy company that owns most of the country’s hydroelectric power plants. ‘RusHydro has been among the companies most affected by high rates.
However, RusHydro has ambitious plans. The company is investing in the construction of new generating capacities in the Far East, which needs additional financing. Due to the unfavourable situation, RusHydro may refuse to pay dividends for 2023.
However, Finam analysts emphasise that the company’s share price already takes into account this negative situation. Taking into account the gradual commissioning of new capacities, experts consider the securities promising for investments for a long period of time.
Finam analysts recommend BUYing RusHydro shares with a target price of RUB 0.65 and a growth potential of 24%.
Exelon
The U.S. utility sector continues to grow steadily. Over the past 12 months, the S&P 500 Utilities sector index has increased by 33%. As experts predict, in 2024, US electricity consumption could not only recover from the 2023 downturn, but also renew historic highs.
Exelon is one of the largest utility holding companies in the US, serving 10.6 million customers.
In the third quarter of 2024, Exelon’s revenue grew 2.9% year-over-year to $6.2 billion. In addition, by the end of 2024, regulators will rule on the investment programmes of the holding company’s subsidiaries ComEd, PECO and Pepco, which will set the parameters for 90% of Exelon’s overall investment programme through 2027. This could boost Exelon’s financial performance.
The company plans to spend $34.5bn on investments in 2024-2027.
Finam analysts recommend ‘Buy’ Exelon shares with a target price of $43.4 and upside potential of 14%.
ENN Energy
According to the National Energy Administration of China, energy consumption in China increased by 7.9% in the first six months of 2024 compared to the same period in 2023. Contributing to the increase in energy consumption in the Middle Kingdom is the abnormally hot summer weather and the growing popularity of electric cars.
ENN Energy is a Chinese utility company specialising in natural gas distribution and sales. ENN Energy’s customer base reached 30.5 million in the first half of 2024, with retail gas sales up 4.5% year-over-year to 12.7 billion m³ and wholesale supplies adding 1% to reach 3.7 billion m³.
ENN Energy is one of the leaders in the Chinese market of local energy grids, their popularity is growing as the transition to ‘green’ energy sources, which will contribute to further growth of the company.
Finam analysts recommend ‘Buy’ ENN Energy shares with a target price of HK$78.5 and a 41.2% upside potential.
Longyuan Power
Longyuan Power is China’s largest operator of wind power plants (WPPs). The company is benefiting from the energy transition to renewable energy. It also continues to expand its generation assets. For example, Longyuan Power increased its solar power plant (SPP) capacity by 82.9 per cent, 2.0 GW, to 8.0 GW in the first nine months of 2024. At the same time, solar revenue increased by 65.5%, reaching 1.6 billion yuan.
According to experts, Longyuan Power shares have significant upside prospects. China continues to increase the use of ‘green’ capacity.
Finam analysts recommend ‘Buy’ Longyuan Power shares with a target price of 8.2 yuan and a growth potential of 19.1%.
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