TP&H 09:45 AM EST, 02/01/2022 (MT Newswires) -- Tudor, Pickering and Holt on Tuesday reiterated its buy rating on the units of Brookfield Renewable Partners L.P (BEP-UN.TO) with US$39.00 target price as it fine tuned its expectations for the power producer's fourth-quarter results.
"Our primary investor inbound is why the stock is trading at a 2023e 0.6% CAFD yield premium compared to NAm peers," analyst Matt Taylor noted. "We view the premium as justified given an asset mix predominately comprised of pure-play renewables totaling ~100% of 2023e EBITDA (vs covered peers of ~84%), plus a superior growth backlog of 56GW (gross) representing ~2.7x of installed capacity diversified across technology and geography. For Q4'21, we are modeling in-line EBITDA of $440mm driven by higher hydro and solar contributions offset by weaker wind generation. We anticipate inflation protection, re-contracting at higher rates, modest opex savings, and new growth will translate to attractive 2-yr EBITDA and CAFD CAGRs of ~6% and ~7% (excluding the $127mm realized gain in Q1'21), respectively, that underpins a growing ~4% distribution yield. Importantly, the company has maintained a targeted equity return range of 12-15% generating 10+% FFO cash flow growth (TPHe ~13% through 2023) at the top end of its 6-11% guidance over the medium term despite macro headwinds due to: 1) Cost inflation mitigated by global scale that provides procurement advantages, and pass throughs to PPA pricing, 2) Rising interest rates offset by minimal floating rate debt exposure (~3%) and average term to debt maturity of 10-13 years, and 3) Size and scale provides accretive M&A opportunities not included in FFO guidance, such as the recent Urban Grid acquisition with returns expected above the guided range. Reiterate BUY rating with a $39 target price."
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