Fortum: Cheap Nordic hydropower
We reiterate our Buy recommendation for Fortum but revise our target price to EUR 15.0 (was EUR 16.0). The Generation segment at the core of the company proved its ability in Q2 even under difficult conditions, but the other parts of the Group pushed the result down more than expected. Our earnings estimates decreased with electricity prices, but less than we anticipated due to Generation’s strong performance. The share is cheap both in absolute terms (2023e P/E 9x) and relative to peers (over 20% discount), and we consider the expected return to be very good, especially considering the high dividend yield. There is still a clear risk of a downward trend in electricity prices.
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