Brookfield Renewable Partners Non Voting Units BRENF

TD

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Our Action List Pick

Brookfield Renewable Partners L.P.
BEP-N, BEP.UN-T: US$27.05; ACTION LIST BUY 12-Month Target: US$41.00

BEP’s unit price has underperformed most of its peers since the most recent sector peak in Q3/22. Since mid-August, the company’s unit price has declined 31% versus an average decline of 27% for Canadian Renewable IPPs and a 12% decline for international peers. BEP’s current unit price is at its lowest point in over two years. Brookfield Renewable is trading at 15.5x 2023E EV/EBITDA — above the Canadian Renewable IPP average of 12.3x, but the premium has shrunk in recent months. The consensus 12-month forward EV/EBITDA multiple of 14.7x is below the 17.1x average observed over the last five years.

We believe that BEP deserves a valuation premium based on several factors: scale, broad investment opportunity-set, consistent value-accretive track record, ability to act on large/complex transactions, operating/procurement expertise, management depth, and a strong funding platform. BEP's annual equity investment target over the next five years is $1.2 billion-$1.4 billion. Although M&A is the most material growth lever for BEP, the company continues to grow its organic growth platform. BEP has also continued to broaden its energy transition-focused investments, including its pending acquisition of a 51% interest in Westinghouse (nuclear services). BEP expects to grow normalized FFO/unit at a 10%+ CAGR over the next five years before prospective M&A. In our view, investors underestimate BEP's earnings resiliency in a recession environment.

December 21, 2022