<Results Analysis> 4Q23 results a beat with FY23 in-line; Healthy FY24F outlook
- 4Q23 CAFD a beat, with FY23 in-line; 2024 CAFD guidance reiterated with robust +15% yoy growth
- 1Q24 dividend raised 1.7% to US$0.4033 (US$1.6132/share annualised, 7% yield); Reiterate 5-8% DPS growth through 2026
- Strong sponsor’s pipeline of c. 29GW, nearly quadruple of current capacity of c.8GW, and potential M&A opportunities to drive growth. Maintain BUY with unchanged TP of US$25.
4Q23 CAFD a beat, with FY23 in-line; Robust FY24F outlook reiterated. 4Q23 CAFD of US$53m (-66% qoq, up from 4Q22 CAFD loss of -US$2m) beat consensus estimates by +23% on strong conventional power generation offset by lower wind resources, with 4Q a low base similarly witnessed in previous years due to seasonality factors (note 4Q22/4Q21 at -US$2m/US$35m) . FY23 CAFD of US$342m is in-line with consensus estimates and within management’s guidance, translating into a +5% yoy growth, with management reiterating its FY24F CAFD guidance of US$395m which translates into a robust +15% growth. For 1Q24, management has increased the quarterly dividend by 1.7% qoq to US$0.4033 per share, or US$1.6132 per share in annualized terms (implied annualised yield of c. 7%) and continues to target DPS growth in the upper range of 5-8% through 2026, with targeted 7% DPS growth in 2024. Overall, we remain confident in management’s ability to execute on its FY24F guidance, supported by various projects coming online in 2024 (e.g., Cedro Hill Repowering, Cedar Creek, Rosamond Central Storage) and expected operational improvements in renewable energy production.
Reaffirming long-term targets, with no external equity/debt; Potential M&A a positive catalyst. CWEN has raised over US$1.3bn of corporate level capital in 2022 from the sale of its thermal business, of which US$0.6bn has been allocated in prior commitments, with the remaining US$0.7bn expected to be allocated going forward. Management reiterated its FY26 DPS growth target and FY26 CAFD per share target of US$2.15, with growth funded by excess thermal sales proceeds which positions CWEN for no need for external capital financing. We believe CWEN’s long-term growth outlook remains on track as supported by the sponsor’s strong development pipeline of c.29GW, including c.7GW of late-stage projects expected to feature commercial operations in the next 4 years, that could potentially be dropped down to CWEN. Management has also cited for potential M&As, which could act as another positive catalyst. We maintain BUY with unchanged TP of US$25.