Naturgy Energy Group, S.A. (NTGY.MC) | Investment Case

1. Company Snapshot

1.a. Company Description

Naturgy Energy Group, S.A., together with its subsidiaries, engages in the supply, liquefaction, regasification, transport, storage, distribution, and sale of natural gas.It operates through Energy and Network Management, Renewables and New Business, Supply, and Rest segments.The company engages in the regulated gas and electricity distribution; sale of liquefied natural gas and the sea transport business; management of the gas pipelines and conventional thermal generation facilities; and generation and sale of electricity through wind, mini-hydro, solar, and cogeneration sources, as well as provision of supply management services.

It serves in Spain, Argentina, Brazil, Chile, Mexico, Panama, the rest of Latin America, and internationally.The company was formerly known as Gas Natural SDG, S.A. and changed its name to Naturgy Energy Group, S.A. in June 2018.Naturgy Energy Group, S.A. was incorporated in 1843 and is based in Madrid, Spain.

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1.b. Last Insights on NTGY

Naturgy Energy Group's recent performance was driven by several positive factors. The company's largest shareholder has been approached by UAE's Taqa to revive an offer for a stake in the €24 billion Spanish utility, indicating potential interest in the company. Additionally, Naturgy has entered into a new partnership with Crowley to increase liquefied natural gas deliveries to Puerto Rico, addressing the territory's chronic power outages. This deal is expected to provide a significant boost to Naturgy's revenue and solidify its position in the energy sector.

1.c. Company Highlights

Last Price	26.74
Change Percentage	-2.05%
Open	27.02
Previous Close	27.3
Market Cap ( Millions)	25684
Volume	625454
Year High	27.9
Year Low	22.42
M A 50	26.65
M A 200	26.31

FCF Yield	9.40%
Dividend Yield	6.31%
ROE	23.24%
Debt / Equity	217.37%
Net Debt / EBIDTA	293.77%
Price To Book	3.29
Price Earnings Ratio	12.77
Price To FCF	10.64
Price To sales	1.27
EV / EBITDA	8.4

2. Naturgy Delivers Robust H1 '25 Results with Strong EBITDA and Dividend Growth

Naturgy reported a standout performance in its H1 '25 results, demonstrating resilience against a backdrop of macroeconomic uncertainty. The company posted an EBITDA of EUR2.9 billion and a net income of EUR1.1 billion, marking a significant increase compared to the previous year. The dividend per share of EUR0.60 exceeded consensus expectations, while the 2025 guidance surpassed market forecasts, underpinned by a strong operational execution. As CEO Francisco Reynés highlighted, "Our diversified business model and geographic presence have been instrumental in navigating the current macro challenges and delivering solid results."

Publication Date: Jul -23

                                    📋 Highlights
                                    Strong Financial Performance::
                                                EBITDA reached €2.9 billion and net income €1.1 billion, showing significant growth compared to the previous year.
Dividend and Guidance::
                                                Announced a €0.60 per share dividend, exceeding consensus, with 2025 guidance above market expectations.
Business Diversification::
                                                EBITDA split: 47% from networks and 53% from energy management, generation, and supply, ensuring earnings resilience.
Geographic Balance::
                                                60% of EBITDA from stable geographies like Spain and 42% from international activities, highlighting diversification.
Strategic Plan::
                                                Focus on network resilience, vertical integration, and gas as a transitional energy source, aiming for a 7% yield and growth in DPS.

                                

Segment Performance and Geographic Contribution

The company's EBITDA was evenly split between Networks (47%) and Energy Management, Generation, and Supply (53%). Networks generated EUR1,344 million, down 8% year-on-year, while Energy Management posted a 36% increase to EUR524 million. Thermal Generation rose 10% to EUR330 million, and Renewables remained stable at EUR322 million. Supply EBITDA declined 15% to EUR386 million. Geographically, Spain contributed 60% of EBITDA, with international activities accounting for 42%, showcasing the company's balanced exposure.

Strong Balance Sheet and Strategic Plan Execution

Naturgy maintained a robust balance sheet with net debt of EUR13.7 billion and a net debt-to-EBITDA ratio of 2.6x. Liquidity stood at EUR8.6 billion, underscoring financial stability. The company remains on track with its '25-'27 strategic plan, emphasizing network resilience, vertical integration, and the role of gas in the energy transition. Management reiterated its commitment to capital discipline, prioritizing value over size and focusing on hybridization in renewable investments rather than new capacity.

Valuation and Shareholder Returns

Naturgy currently trades at a discount to peers on EV/EBITDA (8.0x) and P/E (13.8x) metrics but offers a premium dividend yield of 5.88%. The company is committed to improving free float and liquidity to regain its position in MSCI indexes. With a strong dividend policy and a free cash flow yield of 6.86%, Naturgy is well-positioned to deliver shareholder value while maintaining financial discipline.

2025 Guidance and Operational Outlook

For 2025, Naturgy expects EBITDA to exceed EUR5.3 billion and net income to surpass EUR2 billion, supporting a dividend payout of EUR1.7-1.9 per share. Debt is projected to remain below EUR14.7 billion, with the net debt-to-EBITDA ratio stable at 2.6x. The company is focused on operational efficiency, aiming to reduce operating expenses and enhance returns on invested capital and equity. Management expressed confidence in maintaining stable gas and electricity margins in H2, supported by a fully hedged position for 2025.

Strategic Initiatives and Regulatory Environment

Naturgy is prioritizing value creation over M&A, with no active projects currently underway. The company supports a 3-year extension of Spanish nuclear life, viewing it as an opportunity to reshape the electricity generation landscape. Additionally, Naturgy remains unaffected by the European Commission's ban on Russian LNG, given the structuring of its Yamal contract. The company is also closely monitoring regulatory developments in gas distribution and network incentives, ensuring alignment with its financial discipline approach.

Capital Structure and Shareholder Focus

Overall, Naturgy's H1 '25 results highlight its ability to deliver strong financial performance and shareholder returns while navigating a complex energy transition landscape. The company's strategic focus on diversification, financial discipline, and operational efficiency positions it well for long-term success.

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.57%)

6. Segments

Energy Markets - Supply

Expected Growth: 6.8%

- As energy demands continue to grow, the wholesale market segment is expected to expand, fueled by increasing adoption of renewable energy sources, government initiatives promoting energy efficiency, and rising electricity demand from industries such as data centers and electric vehicles.

Energy Markets - Energy Management

Expected Growth: 8.5%

- The energy management services segment is expected to grow, driven by increasing demand for energy efficiency and risk management solutions among industrial and commercial clients, as well as the rising adoption of renewable energy sources and energy storage technologies.

Distribution Networks - Brazil Gas

Expected Growth: 7.1%

- Growing demand for natural gas in Brazil, driven by government initiatives to reduce carbon emissions and increase energy security, as well as increasing urbanization and industrialization, are expected to drive growth in the gas distribution segment.

Distribution Networks - Spain Gas

Expected Growth: 6.5%

- With an extensive network spanning over 50,000 kilometers, serving more than 4.5 million supply points, Naturgy’s dominant position in Spain’s gas distribution market, coupled with increasing demand for cleaner energy sources, are expected to drive growth.

Distribution Networks - Chile Gas

Expected Growth: 5.5%

- Chile’s natural gas market is expected to grow steadily, driven by increasing energy consumption, government support for cleaner energy sources, and infrastructure development, which will lead to higher demand for gas pipeline services.

Distribution Networks - Mexico Gas

Expected Growth: 4.8%

- Mexico’s growing industrial sector, increasing demand for clean energy, and government initiatives to expand natural gas infrastructure are driving growth in the country’s natural gas distribution market.

Distribution Networks - Argentina Gas

Expected Growth: 4.8%

The Argentine gas distribution market is driven by increasing demand for natural gas as a cleaner energy source, government initiatives to promote energy efficiency, and growing industrial activity in regions such as the Vaca Muerta shale formation.

Energy Markets - Renewable Gas

Expected Growth: 10.5%

- The renewable gas segment is poised for growth, driven by increasing government regulations and incentives promoting the adoption of low-carbon energy alternatives, rising demand for clean energy from industrial and transportation sectors, and advancements in production and distribution technologies.

Energy Markets - Thermal Generation - Spain

Expected Growth: 5.1%

- The Spanish thermal power generation market is driven by the country’s increasing focus on reducing carbon emissions, and the subsequent shift towards cleaner and more efficient energy production, such as combined cycle gas turbines and internal combustion engines.

Energy Markets - GPG LATAM

Expected Growth: 6.5%

- Latin America’s increasing energy demand, driven by rapid industrialization and urbanization, is expected to propel the gas and electricity market, trading, and sales, with customized energy solutions catering to the region’s unique needs.

Distribution Networks - Panama Electricity

Expected Growth: 7.5%

- Panama’s growing economy, increasing demand for electricity, and government initiatives to improve energy infrastructure are expected to drive growth in the electricity distribution segment.

Distribution Networks - Spain Electricity

Expected Growth: 6.5%

- The distribution networks segment is poised for growth driven by increasing demand for electricity, investments in grid modernization and expansion, and government initiatives promoting electrification of transportation and heating.

Distribution Networks - Argentina Electricity

Expected Growth: 7.1%

- Argentina’s growing demand for electricity, fueled by industrialization and urbanization, coupled with the need for grid modernization and infrastructure investments, drive growth in the electricity distribution segment.

Energy Markets - Renewable Generation - Spain

Expected Growth: 8.5%

- Spain’s renewable energy sector is expected to drive growth, fueled by the country’s ambitious decarbonization targets, increasing demand for clean energy, and supportive government policies, positioning Naturgy for continued expansion in the Iberian Peninsula.

Energy Markets - Renewable Generation - GPG LatAm

Expected Growth: 12.1%

- Driven by increasing demand for clean energy, supportive government policies, and declining technology costs, the Latin American wind and solar power segment is poised for rapid growth, contributing to a low-carbon energy transition.

Energy Markets - Renewable Generation - GPG Australia

Expected Growth: 10.3%

- The renewable energy market in Australia is driven by increasing government support and investments in clean energy, declining costs of renewable energy technologies, and growing demand for renewable energy certificates and green energy products from commercial and industrial customers.

Energy Markets - Renewable Generation - USA

Expected Growth: 12.4%

- The US renewable energy market is driven by increasing demand for clean energy sources, declining technology costs, and policy support, such as tax credits and state-level renewable portfolio standards, which are expected to propel growth in the wind and solar power projects segment.

Eliminations

Expected Growth: 4.1%

- This segment’s growth is driven by the increasing focus on operational efficiency, the need to optimize resources, and the trend of divesting non-core businesses and subsidiaries to concentrate on core activities.

Energy Markets - Holdings and Eliminations

Expected Growth: 5.1%

- The energy markets business is driven by increasing demand for wholesale energy trading, optimization, and hedging activities, as well as growth in intra-group transactions, leading to eliminations that contribute to the segment’s revenue growth.

7. Detailed Products

Electricity

Naturgy Energy Group, S.A. generates and distributes electricity to residential, commercial, and industrial customers.

Natural Gas

The company explores, produces, and distributes natural gas to meet the energy demands of various sectors.

Renewable Energy

Naturgy Energy Group, S.A. invests in renewable energy sources like wind, solar, and hydroelectric power to reduce carbon footprint.

Energy Services

The company offers energy efficiency solutions, energy management, and maintenance services to optimize energy consumption.

LNG and International

Naturgy Energy Group, S.A. engages in the liquefied natural gas (LNG) business, importing and exporting LNG globally.

8. Naturgy Energy Group, S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Naturgy Energy Group, S.A. operates in the energy sector, where substitutes are limited. However, the increasing adoption of renewable energy sources and energy-efficient technologies poses a moderate threat to the company's operations.

Bargaining Power Of Customers

Naturgy Energy Group, S.A. serves a large customer base, which reduces the bargaining power of individual customers. Additionally, the company's diversified customer portfolio and long-term contracts further mitigate the bargaining power of customers.

Bargaining Power Of Suppliers

Naturgy Energy Group, S.A. relies on a diverse range of suppliers for its operations. While the company has some bargaining power due to its scale, suppliers of critical components or services may still exert some influence over the company.

Threat Of New Entrants

The energy sector is characterized by high barriers to entry, including significant capital requirements, regulatory hurdles, and technical expertise. These barriers limit the threat of new entrants to Naturgy Energy Group, S.A.'s operations.

Intensity Of Rivalry

The energy sector is highly competitive, with numerous players vying for market share. Naturgy Energy Group, S.A. faces intense competition from established players and new entrants, which may lead to pricing pressures and reduced market share.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	60.82%
Debt Cost	6.74%
Equity Weight	39.18%
Equity Cost	7.31%
WACC	6.97%
Leverage	155.22%

11. Quality Control: Naturgy Energy Group, S.A. passed 1 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

ENGIE

A-Score: 7.2/10

Value: 7.0

Growth: 5.6

Quality: 3.6

Yield: 10.0

Momentum: 7.0

Volatility: 10.0

1-Year Total Return ->

Italgas

A-Score: 6.7/10

Value: 4.6

Growth: 3.9

Quality: 4.9

Yield: 8.1

Momentum: 9.0

Volatility: 9.7

1-Year Total Return ->

Unimot

A-Score: 6.7/10

Value: 8.4

Growth: 9.3

Quality: 3.0

Yield: 8.1

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

Naturgy Energy

A-Score: 6.7/10

Value: 5.9

Growth: 4.0

Quality: 5.0

Yield: 8.8

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

Iberdrola

A-Score: 6.2/10

Value: 3.7

Growth: 5.4

Quality: 4.6

Yield: 6.2

Momentum: 7.0

Volatility: 10.0

1-Year Total Return ->

SSE

A-Score: 5.8/10

Value: 5.9

Growth: 4.9

Quality: 4.5

Yield: 6.9

Momentum: 3.5

Volatility: 9.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-1.40%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.97%

Naturgy Energy Group, S.A. - ES0116870314

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on NTGY

1.c. Company Highlights

Cheaper

Higher Yield

Lower Quality

Earnings Beats

Revenues Beats

Weak Momentum

Revenues Miss

Fairly Valued

Medium Volatility

Better Quality

Earnings Miss

Stable Momentum

Less Volatile

Strong Momentum

Average Yield

Average Growth

Average Quality

2. Naturgy Delivers Robust H1 '25 Results with Strong EBITDA and Dividend Growth

Segment Performance and Geographic Contribution

Strong Balance Sheet and Strategic Plan Execution

Valuation and Shareholder Returns

2025 Guidance and Operational Outlook

Strategic Initiatives and Regulatory Environment

Capital Structure and Shareholder Focus

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.57%)

6. Segments

Energy Markets - Supply

Expected Growth: 6.8%

Energy Markets - Energy Management

Expected Growth: 8.5%

Distribution Networks - Brazil Gas

Expected Growth: 7.1%

Distribution Networks - Spain Gas

Expected Growth: 6.5%

Distribution Networks - Chile Gas

Expected Growth: 5.5%

Distribution Networks - Mexico Gas

Expected Growth: 4.8%

Distribution Networks - Argentina Gas

Expected Growth: 4.8%

Energy Markets - Renewable Gas

Expected Growth: 10.5%

Energy Markets - Thermal Generation - Spain

Expected Growth: 5.1%

Energy Markets - GPG LATAM

Expected Growth: 6.5%

Distribution Networks - Panama Electricity

Expected Growth: 7.5%

Distribution Networks - Spain Electricity

Expected Growth: 6.5%

Distribution Networks - Argentina Electricity

Expected Growth: 7.1%

Energy Markets - Renewable Generation - Spain

Expected Growth: 8.5%

Energy Markets - Renewable Generation - GPG LatAm

Expected Growth: 12.1%

Energy Markets - Renewable Generation - GPG Australia

Expected Growth: 10.3%

Energy Markets - Renewable Generation - USA

Expected Growth: 12.4%

Eliminations

Expected Growth: 4.1%

Energy Markets - Holdings and Eliminations

Expected Growth: 5.1%

7. Detailed Products

Electricity

Natural Gas

Renewable Energy

Energy Services

LNG and International

8. Naturgy Energy Group, S.A.'s Porter Forces

12.e Scoring ^Insights

12.f DCF ^BETA