The AES Corporation
AES Details
The AES Corporation (NYSE: AES) operates as a diversified electricity generation and distribution business portfolio through its subsidiaries and affiliates.
Result Performance for the Year Ended 31 December 2021 – (FY21)
- Diluted EPS stood at -$0.62 in FY21 versus $0.06 in FY20, primarily due to a loss in Chile's deconsolidation of the Alto Maipo hydroelectric project. Adjusted EPS stood at $1.52 in FY21 versus $1.44 in FY20.
- Signed 5GW of fresh renewables PPAs in FY21, exceeding the original target of 3-4GW; backlog of new projects stood at 9.2GW
- The increased pipeline of development projects to 59GW
- Grew ownership of AES Andes to 99% from 67% in an accretive transaction
Source: Company Reports, Analysis by Kalkine Group
Recent Update
- On 25 February 2022, the company announced a quarterly dividend of $0.1580 per share payable on 13 May 2022, as per the record date 29 April 2022.
Outlook
The company projects a 7-9% growth target through 2025, from the base year of 2020. This growth includes the impact of exiting coal by year-end 2025, which is anticipated to be offset by increased contributions from higher ownership of AES Andes and continued growth in renewables. From 2022 through 2025, the company anticipates receiving $1 billion in asset sale proceeds. Further, it is projecting for Adjusted EPS of $1.55-$1.65, driven by higher contributions from increased ownership of AES Andes, and continued higher growth in renewables and existing operations.
Key Risks
The company is exposed to the risks of changes in its generation facilities or distribution systems' availability due to the rise in scheduled and unscheduled plant outages, equipment failure, failure of transmission systems, etc. Further, it is prone to the risks of economic, social, and political instability in any country or region, as well as adverse changes in currency exchange rates.
Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)
Technical Overview:
Daily Price Chart
Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)
Stock Recommendation
The company has delivered a 6-month and one-year return of ~-11.91% and ~-20.07%, respectively. The stock is trading lower than the average price of the 52-week low-high range at $28.86-$19.764.
The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to peer average EV/Sales multiple (NTM basis), considering 2022 Adjusted EPS guidance, and a record backlog.
Considering the factors above, we give a “Buy” recommendation on the stock at the current market price of $21.08 per share as of 28th February 2022 (Time: 10:40 AM, NY, USA).
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
The AES Corporation (AES) is a part of Kalkine’s Global Fully Charged Product
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined:-
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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