Volkswagen, Siemens Gamesa and ITM Power have featured in a list of green stocks that “missed the rally” and therefore have better future growth prospects relative to the wider market.
Bloomberg Intelligence has identified the 11 companies with its EU Green Recovery Tracker and said that spurred by the ‘Green Swan’ of $3trn fiscal stimulus in the EU, they have “differentiated business models, stronger growth than the consensus and lagging valuations” when compared to pure renewable energy players.
The note titled Green Recovery Picks: Past The Usual Suspects written by Adeline Diab, head of ESG and thematic investing EMEA, explained: “Clean energy and electric vehicle multiples reached new highs in 2021 with investment appetite driven by policy support. While much of that may be priced into the shares, some have lagged at more conservative valuations.
“We believe the 11 companies in our tracker could benefit from improved prospects but haven’t seen a valuation bump.”
She added the companies are exhibiting 9.8x EV/Ebitda, which is 6x lower than pure renewable energy players, and Ebit growth of the companies in our portfolio could be 37% higher than the STOXX Europe 600 Index in 2021.
The 11 companies
- Volkswagen
- Alstom
- Siemens Gamesa
- RWE
- Saint Gobain
- Vinci
- Legrand
- Schneider Electric
- ITM Power
- Neste
- ArcelorMittal
Diab added: “Our EU Green Recovery Tracker has outperformed the Stoxx 600 by 57% since the start of 2020, yet we believe the companies could benefit even further as green stimulus and policies feed through to sales and earnings. Our portfolio’s 10.4x enterprise value to 2021 Ebitda is 50% below the index, reflecting sector and thematic diversity across renewable energy, green building and transportation.”
The note also highlighted ITM Power and Siemens Gamesa shares gained 251% and 93%, respectively, over the past year while Vinci lost 17% and Alstom 5% — reflecting the “market’s rush” toward the most direct beneficiaries of green funding.
“Yet, these four companies have strong exposure to the green recovery and further development and new catalysts in 2021, in our view,” Diab said.
Green stimulus
The EU’s $3trn fiscal stimulus is not fully reflected in market pricing, according to Diab, but will be of huge benefit to these 11 companies.
“The government’s spending will be directed at areas of innovation – energy efficiency, building management, transportation, digitalisation and electrification – that can help cut carbon emissions by more than 15%, or one-third of the 50% required by 2030, according to the World Economic Forum. Volkswagen appears to be weighed down by its diesel past, and its plan to surpass Tesla in electric vehicle production by 2023 is overlooked.”
Diab added Volkswagen’s electric vehicle sales could surpass Tesla’s by 2023 yet its valuation remains depressed at 32x less and Alstom, Legrand and Schneider Electric lead their Stoxx 600 peers in percentage of sales spent on R&D by 15-85% – this is helping enable smart technology in cities, grids and buildings, yet is not reflected in their valuations.
See also from Bloomberg Intelligence: – ‘Perfect storm’ will accelerate ESG assets to top $53trn by 2025
