Credit Suisse Raise Target With changes to his new asset value projections and seeing “limited excess return potential,” Credit Suisse analyst Andrew Kuske downgraded both TransAlta Corp. and TransAlta Renewables Inc. to “neutral” recommendations from “outperform” previously.
His target for TranAlta fell to $15 from $17.50, while his TransAlta Renewables target slid to $14 from $17. The average targets on the Street are $15.96 and $13.71, respectively.
“In our Canadian Infrastructure coverage universe, we continue to favour the Renewable/Power sub-sector for exposure amongst the three distinct areas (i.e. the others being Energy Infrastructure and Utilities),” he said. “Three reasons underpin our preference: (a) the growth potential; (b) outright and relative performance (both stock and sector specific); and, (c) valuation dynamics – more relative to history versus outright. In this note, consistent with other areas of exposure, we transitioned anchor multiples for valuation to 2024 in our renewable power Net Asset Value (NAV) framework.”
“In terms of sector themes, the most significant and overarching theme continues to revolve around energy transition efforts – occurring in all markets of relevant exposure at various paces. Clearly, energy transition efforts became enhanced with the U.S. Inflation Reduction Act (IRA) along with efforts to ‘level the playing field’ that are in focus with Canadian specific catalysts likely unveiled with the forthcoming Federal budget. Sector growth trends are more favourable than other sub-sectors, however, competitive advantages vary amidst a secular wave of capital inflows. Stock specifics include: (a) Alberta’s abundance via Capital Power Corporation (CPX) and TA; (b) engaged on the European experience (Boralex Inc. (BLX), Brookfield Renewable Partners LP (BEP), Innergex Energy Renewable Inc. (INE) and NPI); (c) the potential turnarounds or other consequences – Algonquin Power & Utilities (AQN) and RNW; and, (d) a diversification dilemma (BEP).”
Mr. Kuske also made these target adjustments:
- Boralex Inc. ( “neutral”) to $43 from $38.50.Average: $47.58.
- Capital Power Corp. ( “outperform”) to $53.50 from $56. Average: $52.12.