The AES Corporation
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)
Source: Company Reports, Analysis by Kalkine Group
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.
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)
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).
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.