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Red Electrica Corporacion SA REE

Rating as of

Morningstar’s Analysis

Currency in EUR
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Red Electrica Tops Consensus on Third-Quarter Bottom Line, Shares Rich

Tancrede Fulop, CFA Senior Equity Analyst

Analyst Note

| Tancrede Fulop, CFA |

We maintain our fair value estimate of EUR 15.5 per share along with our no moat rating after Red Electrica released nine-month results above FactSet consensus on the bottom line thanks to a lower tax rate and finance costs. The dividend floor of EUR 1 through 2022 offers a 5.7% dividend yield, above the 4.5% sector average. However, the floor will be reduced to EUR 0.8 in 2023-25, implying a 4.5% yield. Also, we project flat EPS through 2025. This unappealing earnings outlook reflects the end of the remuneration of assets commissioned before 1998, due in 2024. Shares appear overvalued. 

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Company Profile

Business Description

Red Electrica owns and operates the Spanish electric transmission system. The company has acquired almost all of the nation's power grid, which other owners were forced to sell to it by government decree. Its activities are regulated by the National Energy Commission, which answers to the Spanish legislature. Red also operates a small fibre-optics network in Spain and has a growing Latin American infrastructure business. The group significantly increased its exposure to telecommunications by acquiring Spanish communications satellite operator Hispasat from Abertis in 2019.

Paseo del Conde de los Gaitanes, 177, Alcobendas
Madrid, 28109, Spain
T +34 916508500
Sector Utilities
Industry Utilities - Regulated Electric
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 2,091