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EQUITY REPORT - EDP

27/12/2014
Company:

Business
EDP is a global leading Energy company with true vision of value
creation, innovation and sustainability. The company has broad
operations in North and South America and Europe and relative
exposure in Africa and Asia.
EDP is among largest Portuguese industrial group, is among the major
European operators and is the 3rd largest producer of wind energy.

Chairman/CEO:

António Mexia

Sector: Electric Utility

Ticker : EDP.LS

Share Price:(09/12/2014)
3.44 €

Stock Exchange:
Euronext Lisboa

Market Capitalization:
12.7 Billions

Shares
Outstanding: 3.7
Billions

Fiscal Year: 2013

Volume: 7.7

Major Shareholders :

China Three Gorges;
Oppidum Capital, SL;
Iberdrola

Besides participating in the electricity sector, combining generation,
distribution and trading, the company also evidences significant
presence in the gas sector of the Iberian Peninsula.

Company News
According to Reuters, Moody’s affirms rating of EDP revising its
outlook from negative to positive, which is partly in line with the
deleveraging policy of EDP. This change is particularly due to an

Revenues and profits

improving operating and macroeconomic environment of EDP.
Also according to news published by Reuters, EDP reached an

2013

agreement with a fund led by EFG Hermes to sell 49% equity

2012

shareholding and outstanding shareholders loans in an operating wind

2011

farm portfolio. Although it is stated in the news that EDP reported a

2010

1% drop in nine-month net profit, it was particularly due to a drought
in Brazil, regulatory changes in renewable energy in Spain and foreign
exchange effect.

Net Profit
Revenue

0

1

2

3

4

5

Million €

Main Competitors
 GALP Energia

Stock Performance

 Iberdrola
120

3,50

100

3,00

2014

Company

Sector

Price to Sales

1.95

3.2

EV / EBITDA

7.84

14.3

PER

38.17

14.8

PBV

0.73

3.8

80

2,50
2,00

60

Close
Volume

1,50

40

1,00
20

0,50
0,00
2009

Multiples

Million €

4,00

0
2010

2011

2012

2013

2014

Corporate Finance Department | ffc@fepfinanceclub.org | www.facebook.com/FEPFinanceClub

Valuation Results
According to our valuation, the value per
share of the company is higher than its price
per share. That means, under our
assumptions, EDP is undervalued by the
market.

Financial Ratios
4,0

45,0

3,5

40,0

3,0

35,0

2,5
2,0

30,0

EPS (€)

25,0

DPS

20,0

1,5

10,0

0,5

5,0

0,0

0,0
2010

2011

2012

PER (sec. axis)

2013

0,3

3,85

0,25

3,8

0,15

Default Spread

3,7

Asset Turnover
Ratio

3,65

Return on Equity

3,6
3,55

0

Financial Leverage
(sec. axis)

3,5
2013

Valuation Summary
2011

2012

2013

1,166

1,144

1,077

0,965

402

434

421

406

CAPEX

2,415

1,005

360

- 696

WC

1,732

80

947

-197

122

18

9

-54

-3,104

40

-240

1,912

EBITDA
Dep. & Am.

Taxes
FCFF

João Rebelo

1.63%
Source: Bloomberg

6.1%

Nga Nhu

Source: IESE BS

4.13%

Kd

0,05

2010

0.99
Source: Reuters

Profit Margin

0,1

(Million €)

7.67%

Market Premium

3,75

0,2

2012

Assumptions

Risk Free (Rf)
3,9

2011

€ 3.97

Beta

0,35

2010

Value per Share

Cost of Equity (Ke)

DuPont Analysis

2009

€ 34.7 M

Payout Ratio

15,0

1,0

Enterprise Value

2.50%
Source: Damodaran

23.00%

Tax rate

Source: KPMG

D/EV

70.7%

WACC

4.50%

Growth Rate (g)

2.30%

Sensitivity Analysis
Δg

Share Value
(€)

Δ
W
A
C
C

Maria Ferreira

2.28%

2.30%

2.32%

4,52%

4.00

3.69

3.77

4,50%

3.89

3.97

4.05

4.36

3.96

4.14

4,48%

Nakib Ahmed

Corporate Finance Department | ffc@fepfinanceclub.org | www.facebook.com/FEPFinanceClub