Romanian brokerage firm BRK Financial Group (BRK) issued a report recommending its customers to buy shares of the nuclear energy producer Nuclearelectrica (SNN), Ziarul Financiar reported.

It indicated a target price of RON 28.6, 24% above the closing price of SNN shares on March 3. The SNN shares gained another 2.8% on Thursday, March 4, and are up 33% since the beginning of this year.  BRK analysts carried the valuation using the discounted cash flow (DCF) model.

"The intergovernmental agreement between the United States of America and Romania was signed and received the European Commission's approval. Thus, the company can start the steps for the construction of Units 3 and 4 from Cernavoda. The USD 7 billion funding will include the construction of the two units and the refurbishment of Unit 1. The project will be carried out by a consortium that will include the United States, Canada, and France," the report argues.

BRK says the potential risks are related to a possible delay in the company's investment plan and a possible increase in the refurbishment and construction costs.

The company is currently trading at low multiples compared to other companies in the same sector, listed on other markets.

For 2021, the estimated price per earning (P/E) for SNN is 9.7x (compared to the median of companies in the sector of 15.9x), and EV / EBITDA is 4.6x (compared to 7.8x). "Therefore, we consider that SNN's share price is undervalued," the report reads.

The dividend policy has been generous in recent years with a dividend distribution rate of over 90%, with the value of the gross dividend increasing, the brokerage house also says.

In 2020, Nuclearelectrica's net profit went up by 28% compared to 2019, according to the company's preliminary results.

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andrei@romania-insider.com