August 2022

Since the beginning of the year, equity markets have fallen sharply, due to the uncertain evolution of the geopolitical and macroeconomic scenario.

Compared to the 24.5% year-to-date correction recorded by the FTSE MIB on 15 July 2022, Italgas stock showed a much smaller decline (-12.1%), in line with the performance of the European utilities index (-11.9%). In an uncertain context, Italgas benefited from the defensive profile offered by its business scope, its sound financial results – which, moreover, allowed the distribution of a dividend of €0.295 per share – and the clear path of future growth indicated by the 2022-2028 Plan.

The average target price of brokers covering Italgas share is 6.16 euro. More than 70% of analysts (13 out of 18) have a target price of 6 euro or more. Therefore, at recent prices the stock still presents significant room for potential appreciation.

Fears of heavy spillovers into the real economy from aggressive monetary policies aimed at curbing inflation drove equity markets downwards

Global equity markets performed very negatively during 2022. The geopolitical tensions triggered by the Russian-Ukrainian conflict and the continuation of the pandemic, with heavy anti-COVID measures reinstated in several Asian countries, produced radical changes in the global scenario, impacting food and energy supply chains and leading to a reversal in monetary policies.

Underlying the bearish stance of the indices were investors’ concerns about the intensity and acceleration of central banks’ restrictive interventions in the face of inflationary developments, with potential risks of economic recession and downward revisions in expected earnings per share of listed companies.

Even though stock market multiples have reached historic lows, a record amount of short positions and a wait-and-see attitude on the part of many large asset managers persists at the global level, waiting for a clearer scenario to emerge.

In the case of the Italian stock market, then, to the negative elements of the general scenario, those of the country risk have recently been added, following the government crisis that opened on 14 July.

Italgas share price shows a decline of around 12% since the beginning of the year, in line with the sector’s trend at European level

Against this backdrop, at the closing price of 15 July, Italgas shares were down 12.1% year-to-date, performing in line with the European sector index, the Stoxx Euro 600 Utilities (-11.9%).

Leveraging on defensive features, the utilities segment had recorded a positive performance until mid-May, but then lost ground essentially due to the sharp fall in the prices of the shares of some German utilities, heavily conditioned by the prospect of a cut in gas supplies from Russia: a factor that was only partly offset by the good performance of the renewables segment. In general, investors continue to favor the stocks of TSOs (Transmission System Operators), both in gas and electricity, considering them the most direct beneficiaries of the changes taking place in the European energy market.

Italgas performance, however, is significantly better than that of the FTSE MIB, the index of blue chips in the Italian stock market, which on 15 July was down 24.5% from its level on 3 January, driven by more than 30% negative performance from some of the largest capitalization stocks, such as Enel, Stellantis and Intesa SanPaolo.

Investors welcome the presentation of the new Strategic Plan 2022-2028, with net investments of 8.6 billion euro planned over the period

In the challenging environment for the financial markets, Italgas benefited from the defensive profile typical of the business in which it operates as well as from the healthy fundamentals, which were confirmed by the annual results for 2021 and the first quarter 2022. In addition, a dividend of 0.295 euro per share was paid to shareholders on 25 May 2022, an increase of 6.5% compared to the previous year’s dividend.

Moreover, the stock saw a positive reaction following the release on 15 June 2022 of the Strategic Plan 2022-2028, which enjoyed general appreciation for the significant amount of net cumulative investments, amounting to 8.6 billion euro, a significant increase compared to the previous Plan, and with a visible impact on future growth prospects.

The 18 analysts covering the Italgas share today present a consensus target price of 6.16 euro. This figure expresses a substantial margin of appreciation for the share compared with the price of the last stock market sessions. At the moment, the difference between the highest (7.9 euro) and lowest (5.4 euro) target price is very wide, even though the target prices below 6 euro are only 5 out of 18, i.e. less than 30%.

The brokers’ recommendations are either positive (7 among Buy, Outperform or Accumulate) or neutral (11 among Hold, Market performer or Equal Weight). Analysts have particularly emphasized in recent updates to their research that Italgas share price trades at low multiples compared to peers.