Itaú BBA has defined Serena’s story as a “value creation chronicle” and has just upgraded the company’s rating from ‘market perform’ to ‘outperform’, placing the company as its top pick among energy generators.
The bank has also raised the price target from R$ 13 to R$ 14.60 – a potential upside of 66% compared to the current price.
According to Itaú BBA, besides Serena having an attractive valuation – 8.4x EV/EBITDA for 2024 and 2025 – the company is very well positioned in the market, with about 93% of its energy sold at higher prices in long-term contracts.
Analysts Fillipe Andrade, Marcelo Sá, Luiza Candiota, and Victor Cunha state that Serena is one of the least susceptible generators to long-term energy price changes.Moreover, for every R$ 10/MWh added to Itaú’s estimated energy price (which is R$ 180/MWh), the stock’s target price increases by R$ 0.60.
“We see Serena trading with an implicit real IRR of 14.5% compared to the Brazilian Treasury’s 6.2%, indicating an attractive premium that should catch investors’ attention,” write the analysts.
The bank also mentions that with the completion of the Goodnight 1 project, there are no doubts about Serena’s ability to replicate in Texas what it has already done in Brazil.
“Serena not only delivered the asset on time but also showed capex savings and brought a premium partner to the project,” says the report, recalling the company’s partnership with Goldman Sachs.
Furthermore, Serena is exploring alternatives to monetize its asset in the US, either through selling a stake or structuring a capitalization there.
In addition, the company’s leverage is expected to decrease in the coming years, according to Itaú, from 6x last year to 4.5x this year.For 2025 and 2026, the bank forecasts leverage of 3.9x and 3.2x respectively.