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May 2021

04. Solid fundamentals. The average target price of analysts supports additional upside.
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During 2020, Italgas shares outperformed the FTSE MIB index by around 4%. The partial misalignment that has  emerged in recent weeks was driven by the prospect of a new government led by Mario Draghi, which is viewed positively  by the market and has led to the outperformance of the stocks in more cyclical sectors.

Italgas’ visible growth perspectives and solid fundamentals are reflected in the average target price of 5.9 euros of the 18 brokers covering the stock, with 11 analysts presenting target prices between 6.0 and 6.8 euro.

With the share price now 20% above March lows and having benefited from a 2020 dividend yield of 4.7%, the wide gap to the mean target price indicated by analysts suggests further opportunities for appreciation.


Equity markets recover from March lows as expectations of a post-pandemic economic recovery emerge

Since mid-March, European stock markets have recovered from the lows reached during the acute phase of the first wave of the pandemic. Investors have welcomed the effects of the agreement reached among European Union countries on the Recovery Fund, as well as the support offered by the ECB in keeping the risks of the banking system under control.

Markets then experienced a correction in October, when the second wave of infections has raised fears about the economic impacts of the new restrictions introduced, while the outcome of the upcoming presidential elections in the United States appeared uncertain.

Instead, investors’ risk appetite returned in the aftermath of Joe Biden’s victory on 3 November. In the face of a divided Congress, it seems unlikely that a huge fiscal stimulus package will be approved; which makes it more likely that the Fed will inject new funds into the system, actually supporting the share prices. Investors have also found an additional positive trigger in the news – released by some pharma companies – that a vaccine against the virus will be available soon.


Italgas shares perform in line with the FTSE MIB index and remain at a level around 20% above the March 2020 lows

In this context, during 2020, Italgas shares have shown a performance (total return), around 4% higher than that of the FTSE MIB, the index of the blue chips of the Italian stock market. A partial misalignment has emerged in recent weeks, with the prospect of a new government led by Professor Mario Draghi, which has been welcomed by the market and led to the outperformance of the stocks in the more cyclical sectors.

In May 2020, Italgas also paid its shareholders a dividend of 0.256 euros per share, corresponding to a yield of 4.7% on the year-end 2019 price of 5.444 euros.

Despite continuing to trade at levels well above the 2020 low, recorded on 12 March 2020 at 4.11 euro, Italgas stock showed a less brilliant performance than that of the European sector index, the Stoxx Euro 600 Utilities. In this index some large integrated operators with exposure to the renewable energy business have a significant weight. Investors are willing to trade these companies on higher multiples as they benefit at the same time from low bond yields and perspective growth driven by the investments of the EU Green Deal program. Italgas stock, in line with other regulated or semi-regulated utilities, instead appears penalized in relative terms by the expectations of inflationary pressures that may characterize the future economic recovery.


A positive boost from the new strategic planning presentation

This does not prevent Italgas from continuing to benefit from solid fundamentals and attractive growth perspectives, as indicated in the 2020-2026 Strategic Plan presented last October. This picture has also led the two agencies Moody’s and Fitch to confirm Italgas’ long-term credit ratings with Baa2 and BBB+ respectively, both with an outlook that remains unchanged at “stable”.

Official listing: Italian Stock Exchange – MTA

Segment: Blue Chips

Type: Ordinary shares

Index membership: FTSE MIB, FTSE Italy All-Share, Euro Stoxx, Euro Stoxx Utility, Dow Jones Sustainability World, FTSE4Good

Number of outstanding shares: 809.135.502

ISIN Code: IT0005211237

Reuters Code: IG.MI

Bloomberg Code: IG IM

Price as at 15 Feb. 2021: 5.18 euro

Mkt capitalization as at 15 Feb. 2021:

4.19 billion euro

Head of Investor Relations:
Anna Maria Scaglia

The 18 analysts that cover the Italgas stock present a mean target price of 5.9 euro: a level considerably higher than recent stock market prices. Noteworthy, 11 sell-side analysts have target prices equal or higher than 6 euro.

It is precisely because of the wide margins of possible appreciation that most brokers (nine out of 18) recommend buying the stock (Buy/Outperform/Accumulate). Another seven analysts have neutral recommendations (Hold/Equal weight).

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