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 Quarter Ended 30 September 2021 – Q3FY21
Source: Company Reports, Analysis by Kalkine Group
Considering the year-to-date 2021 progress, the company has raised the full year 2021 target to sign renewables under long-term PPAs to 5 GW, from 4 GW. Further, the company has reaffirmed its 2021 adjusted EPS guidance range of $1.50-$1.58. However, it is forecasted to remain at the low end of the range owing to the impact of a non-cash adjustment of $0.07 per share related to equity units issued in March 2021. Additionally, it has reaffirmed its annualized growth target of 7-9% through 2025 from the base year of 2020. Moreover, the company plans to capitalize on its leadership position in the transformation of the electricity sector. The current backlog is at the historical level at 9.2 GW, with 60% in the United States.
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)
Daily Price Chart
Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)
The company has delivered a 6-month and one-year return of ~-11.90% and ~-24.78%, respectively. The stock is trading lower than the average price of the 52-week low-high range at $21.51-$29.07.
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 its healthy performance in Q3FY21, reaffirming 2021 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 $21.56 per share as of 14th February 2022 (Time: 10:14 AM, NY, USA).
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.
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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.