Scotia maintains $28 target Latest Research (November 13, 2024): OUR TAKE: Neutral.
Northland Power reported Q3 results below expectations as generation and pricing headwinds were greater than expected. More importantly, its large offshore wind construction projects continue to track to their time and budget expectations. Management reiterated its 2024 guidance ranges, though Management’s commentary pointing to the higher end of the range was removed. We move down our 2024 estimates to reflect the softer-than-expected quarter. Our 2025 / 2026 EBITDA estimates increase as they now include Hai Long pre-completion revenues, whereas previously, we had them only being set against capital costs (no change in our view of the value of the project). As its construction projects are further derisked and there is greater certainty on cash flows, we expect Northland’s valuation to expand. That said, we think this will be more of a 2025 story, when there is a greater line of sight to the large Hai Long and Baltic Power projects entering service. Northland is currently trading at 8.2x 2027E EV/EBITDA, below our target multiple of 10.2x.