Should you Book Profit on this Electric Power Generation Stock – AES

Apr 05, 2022 12:00 AM PDT | Team Kalkine
Should you Book Profit on this Electric Power Generation Stock – AES


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 22 March 2022, AES Indiana and AES Ohio, a subsidiary of The AES Corporation, announced that they joined the National Electric Highway Coalition (NEHC).


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)

Stock Recommendation

The company has delivered a 6-month and one-year return of ~11.86% and ~-4.33%, respectively. The stock is trading higher than the average price of the 52-week low-high range at $19.77-$28.855.

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 fall of low double-digit (in % terms). In addition, a slight discount has been applied to the peer average EV/Sales multiple (NTM basis), considering a fall in cash and cash equivalents and a rise in Recourse debt and Other noncurrent liabilities in FY21 over FY20.

Considering the aforementioned factors, the current trading levels, and the associated business risks, we advise the investors to book profit. We give a “Sell” rating on the stock at the current market price of $26.50 per share as of 05 April 2022, as on 09:35 am New York Time, USA (GMT-4).

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

The AES Corporation (AES) is a part of Kalkine’s Global Fully Charged Portfolio

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.