InvestorNews

How is the stock market performing in this phase?
Stock markets are currently driven by very different forces: on the one hand, concerns about the potential consequences of higher energy prices following the conflict in Iran, and, on the other, hopes for a swift resolution to the conflict in the Middle East and the fascination of the new horizons opened up by Artificial Intelligence. All of this is unfolding in the midst of an earnings season that in the U.S. market has so far seen 85% of companies beat analysts’ estimates, leading to upward revisions of estimates and target prices by the brokers themselves. Sentiment is slightly different in Europe, where we see fears that the Brent’s new record highs will impact inflation, interest rates as well as economic growth and, in addition, we note some uncertainty over the new tariffs the U.S. administration has announced on European automotive products.

How have utilities performed on the stock market lately?
In general, utilities are experiencing one of the strongest rallies of the past 20 years, driven by the expected increase in electricity demand linked to AI and by the key role they play in the energy transition. Traditionally regarded as defensive plays due to the stability of their cash generation, the largest utilities by market capitalisation - such as Iberdrola, Enel or National Grid - have ceased to be bond-like stocks and have basically become growth stocks due to the expectation of strong earnings growth. This has also led to a re-rating of the entire sector, which is now significantly more expensive than it was a year ago.

How does this compare with Hera’s stock market performance?
Hera has certainly benefited from some general trends favourable to the industry, such as its role as an enabler of the energy transition, for example, but its performance has been mainly driven by company-specific factors. Hera has remained committed to the model of a utility with a controlled risk profile, in line with the characteristics of the latest Business Plan presented in January.
The higher multiples at which the entire utilities sector is currently trading will, in any case, require investors to pick individual stocks from now on, rather than simply riding the broader sector outlook theme. From this perspective, Hera, whose price reached 14 times earnings - a premium compared to its peers - now offers attractive opportunities: following the recent pullback, we are currently at around 12.8 times, roughly one point below the 10-year historical average.

Any changes in the consensus following the release of the 2025 annual results?
No analyst has changed either their estimates or their recommendations. When presenting the Plan in January, we had already disclosed a set of preliminary results for the 2025 financial year, which were confirmed by the actual data in the Financial Statements. Therefore, with an average target price of 4.52 euro, at recent trading prices we currently offer a potential upside of around 15%.
 

The Annual Shareholders’ Meeting was held on 29 April. What evidence emerged from the event?
First and foremost, the high attendance was a very positive sign. Over 800 shareholders, either in person or by proxy, attended the Meeting. They represented approximately 80% of Hera’s share capital. On that occasion, we received remarks that reflected deep appreciation for the results that the management and all the people across the Group achieved in recent years - results that have enabled shareholders to benefit from a Total Shareholder Return that exceeded original expectations.
This year as well, on 24 June, Hera is preparing to pay a dividend of 16 euro cents per share, up 6.7% compared to the previous one: another milestone in the uninterrupted dividend distribution track record that has distinguished Hera since its listing in 2003. In particular, investors with an explicit ESG commitment in their investment mandate who spoke during the Shareholders’ Meeting expressed their support for the strategy underpinning the Plan and reaffirmed their confidence in the leadership team, which was renewed at the helm of the Company for the next three-year term, during that same voting session.

What are the elements that shareholders indicated to appreciate most about Hera’s profile?
In an uncertain and volatile environment as the one we are currently experiencing, it is important for shareholders to be able to count on a stable anchor like Hera. What they consider relevant is that the returns they can achieve today and in the future are the result of prudent management of short- and long-term risks, which is reflected in the structure of the business portfolio and in capital allocation. From their perspective, the huge financial resources Hera has built through the excess cash generated by temporary opportunities seized in the past represent significant value. Not only in terms of additional resources that can be deployed for additional investments, beyond those already included in the Plan, but also as a safeguard against the pitfalls that an energy, economic, or financial crisis might create. From this perspective, the ability to expand leverage is certainly a form of insurance, as it allows the company to cope with difficult times. Just think of the not-so-remote possibility of a scenario in which energy prices rise, bills become more expensive, and utilities are required to make a temporary effort to support customers by increasing their working capital, which would therefore need to be financed.
Shareholders who have been loyal to us over the years understand that the financial flexibility Hera enjoys is also an asset. It enables us to play our cards effectively when other operators face difficulties, as we are ready to seize the new opportunities that arise.

Recent developments have raised some concerns about the potential impact of the energy crisis triggered by the war in Iran on inflation and GDP growth. How might these potential macroeconomic consequences affect Hera?
Over the years, Hera has already demonstrated several times its ability to navigate and overcome crises while remaining resilient in terms of annual results, thanks to a highly well-balanced multi-utility business model, to which we have always remained committed. If anything, in recent years we made our risk management system even more effective. The current structure, with investments increasingly concentrated in regulated businesses, provides our Networks segment with a revenue structure that is automatically indexed and independent of volumes, and therefore of GDP trends.
The portfolio component linked to Waste Treatment can rely on the strong leadership built to maintain pricing at remunerative levels and largely inelastic to GDP, given the sector’s structural undercapacity.
Lastly, the way we manage the Energy supply business is characterised by full hedging of commodity price risk. This structure reinforces the outlook we outlined in the Business Plan presented in January. Of course, in the short term, we are aware that we may face an increase in working capital, due to the new scenario, which may require a financial investment; however, even in that case, we have plenty of leeway.