<Results Analysis> 3Q23 results aligned with guidance, watch for strategic review
- 3Q23 adjusted EBITDA and CAFD missed expectations but still within management’s guidance
- Unchanged quarterly dividend per share of US$0.445 implies c.10% annualised dividend yield, which can help to support share price in near-term
- Investors continue to watch for pace of investments and ongoing strategic review. Maintain HOLD with unchanged TP of US$18.
3Q23 results aligned with management’s guidance. Atlantica Sustainable Infrastructure (AY)’s 3Q23 adjusted EBITDA and cash available for distribution (CAFD) came in at US$223m (-3% qoq, -2% yoy) and US$60m (-6% qoq) respectively, in which adjusted EBITDA missed expectations by 6%. In terms of segment operating results, with the exception of AY’s transmission segment (contributes c.10% of group EBITDA), most segments including (i) renewables (c.75% of group EBITDA), (ii) gas (10%) and (iii) water (5%) segment have missed consensus EBITDA expectations. More specifically, AY’s renewables segment saw softer wind generation in North America, lower revenues at solar assets in Spain due to lower electricity prices and delays in scheduled maintenance plans, which dragged its operational results. Despite the 3Q23 results miss, 9M23 adjusted EBITDA and CAFD were still within management’s FY23 guidance, making up c. 70-80% of full year guidance, noting FY23F adjusted EBITDA guidance of US$790m – US$850m and CAFD guidance of US$235m – 260m. Post 3Q23 results, there has been a -4%/-5% negative revision in consensus FY23F/24F adjusted EBITDA estimates as the market anticipates a softer operational outlook going forward on the back of easing power prices.
Investors continue to watch for pace of investments and ongoing strategic review. AY has 2.1 GW of renewable assets and 6.0 GWh of energy storage development in its pipeline, mostly concentrated in North America, although development pipeline would only be ready to build in 2023/2024, which suggests that CAFD growth will only kick in in the medium to longer term. AY has shifted some 2023 investment commitments into 2024, with 2023 and 2024 investments at US$100-120m and US$150-180m respectively. On a positive note, AY has guided for an upcoming asset recycling of its stake in Monterry, a natural gas asset in Mexico, which in our view can act as a positive catalyst for AY’s share price. Though, the key catalyst to watch for AY remains to be its ongoing strategic review, in which management has provided little to no details to-date. All-in-all, we believe earnings upside should be limited for AY, with results/consensus coming in line with management guidance, and construction of development pipeline only kicking in later this year/2024. Further, little to no guidance on AY’s ongoing strategic review could remain as an overhang to AY’s share price. Going forward, we continue to watch for developments around AY’s pace of investments and strategic review. Maintain HOLD with unchanged TP of US$18.