Elia Upgrade Overview
UBS upgraded Belgian electricity transmission operator Elia Group to "buy" from "neutral" and increased its price target from €142 to €147, citing that the 8% share‑price decline since the July 29 first‑half results was unjustified. The broker noted that the stock had underperformed the European utilities sector by more than 700 basis points after investors reacted to a first‑half earnings miss and a €0.3 billion (4%) reduction in the 2026 capital‑expenditure plan, while the group’s net‑income guidance remained unchanged.
UBS argued that the capex reduction reflected timing rather than a deterioration of the underlying investment programme and that management’s 2026 guidance remained conservative. The broker projects Elia to spend approximately €32 billion in capital expenditure over 2024‑2028 and forecasts a 12% compound‑annual‑growth rate in earnings per share (EPS) between 2025 and 2030, roughly twice the pace of its peers.
The analyst raised its 2026‑2029 EPS estimates by 2‑3% on expectations of higher earnings from Elia’s non‑regulated business and the Nemo Link interconnector, and increased the price target primarily on anticipated higher capex beyond 2029 and improved earnings from non‑regulated operations. UBS highlighted that the 2026 capex trim represents only about 1% of the planned 2024‑2028 investment, and that Elia had already lifted annual capex to €5.2 billion in 2025 from €1.6 billion in 2022. The company’s chief financial officer indicated that Germany’s capex is not expected to decline beyond 2028, leading UBS to assume capex beyond 2029 will remain broadly in line with 2028 levels. Germany’s electricity transmission network is among the fastest‑growing in Europe, requiring additional funding over time.
UBS also observed that Elia was trading at a 33% premium to its spot regulated asset base, below its long‑term average premium of 36%, which the broker viewed as an attractive entry point given the expected earnings growth and regulated‑asset expansion. The new price target of €147 implies a 17% upside from the €125.50 closing price on August 3.