Prysmian rallies, analysts see growth potential in electricity grids

(Il Sole 24 Ore Radiocor) - It is raining buying on Prysmian at Piazza Affari (FTSE MIB). The cable manufacturer's stock gained ground on the back of positive analysts' ratings. Having dismissed concerns about the impact on margins of price normalisation in the electrification sector and inventory reductions in the telecommunications sector, Jeffries focuses on the growth potential of electricity grids. The sector could indeed 'lead to an update of guidance and an upward revision of medium-term targets'.

According to the business house's forecasts, Europe is expected to return after years to record anincrease of around 2-3% in energy demand. Added to this are the forecasts for the United States, where the hunger for electricity could even quadruple by 2040 compared to the previous twenty years, "forcing utilities to increase investment" on the grid. Prysmian - which is already aiming for an Ebitda of 410 million euros by 2027 in the Power Grids segment - will benefit from this scenario, thanks to its good positioning in the United States. According to the experts it will in fact 'achieve an Ebitda of over EUR 480 million in 2024 and EUR 570 million by 2027', writes Jeffries. The business house also sees positive effects from the company's most recently announced deal, namely the one with Encore Wire, mainly because of 'commercial synergies' and cost reductions due to 'the vertical integration in the copper, aluminium and compounds business'. Overall, the deal could add 'EUR 400 million in Ebitda for the first year and an increase of EUR 500 million in the medium term'. With these assumptions, Jeffries raises the target price on Prysmian to €73 from the previous €58, raising the rating to 'buy'. Citigroup's rating is also positive, raising its target price to €67.5.