Centrica plc (CNA.L) | Investment Case

1. Company Snapshot

1.a. Company Description

Centrica plc operates as an integrated energy company in the United Kingdom, Ireland, Norway, North America, and internationally.The company operates through British Gas Services & Solutions, British Gas Energy, Centrica Business Solutions, Bord Gáis Energy, Energy Marketing & Trading, and Upstream segments.It supplies gas and electricity to residential customers, as well as offers energy-related services; and generates power from nuclear assets.

The company also provides installation, repair, and maintenance services for domestic central heating, plumbing and drains, home electrical, and gas and kitchen appliances; and heating, ventilation, and air conditioning equipment, as well as offers breakdown services.In addition, it is involved in the procurement, trading, and optimization of energy; procurement and sale of LNG; and supplies energy efficiency solutions and technologies to residential customers.Further, the company produces and processes gas and oil; develops new fields to maintain reserves; constructs, owns, and exploits infrastructure; and engages in the social enterprise investment fund activities.

Additionally, it provides vehicle leasing, commercial, and insurance services, as well as energy management products and services; and operates a gas storage and franchise network.The company was formerly known as Yieldtop plc and changed its name to Centrica plc in December 1996.Centrica plc was founded in 1812 and is based in Windsor, the United Kingdom.

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1.b. Last Insights on CNA

Centrica plc's recent performance was driven by strong financials, as indicated by a 9.3% stock rise over the past three months. The company's conservative accounting practices, although resulting in soft earnings, did not deter investors. Additionally, Centrica's decision to divest its 46.25% stake in the Cygnus gas field to Ithaca Energy for £215 million aligns with its strategy to focus on carbon storage and reduce gas production exposure. This strategic move is expected to benefit the company's bottom line.

1.c. Company Highlights

Last Price	168.95
Change Percentage	-1.03%
Open	169.65
Previous Close	170.7
Market Cap ( Millions)	7711
Volume	10221642
Year High	180.8
Year Low	123.8
M A 50	171.48
M A 200	160.46

FCF Yield	3.58%
Dividend Yield	2.86%
ROE	-3.07%
Debt / Equity	88.65%
Net Debt / EBIDTA	-121.83%
Price To Book	2.52
Price Earnings Ratio	-70.17
Price To FCF	27.94
Price To sales	0.53
EV / EBITDA	2.62

2. Transcript Summary

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3. NewsRoom

AI Is Powering Utility Stocks Beyond the U.S. 3 Ideas to Play the Trend.

Dec -03

Source:

Tracking the Changing Narrative for Centrica Amid Analyst Upgrades and Nuclear Developments

Nov -29

Source:

ECP Successfully Closes Acquisition of Grain LNG with Centrica plc

Nov -28

Source:

British Gas parent company boss 'happy to pay more' tax for bills to go down

Nov -25

Source:

X-energy rides nuclear wave, raises $700M Series D

Nov -24

Source:

Amazon’s X-energy gets backing from Jane Street as investors bet big on nuclear

Nov -24

Source:

How Recent Developments Are Rewriting the Story for Centrica

Nov -13

Source:

Highview secures £130m funding for long-duration energy storage solution

Nov -11

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.24%)

6. Segments

British Gas Energy

Expected Growth: 4.83%

British Gas Energy's 4.83% growth is driven by increasing demand for energy-efficient solutions, government incentives for renewable energy, and strategic investments in smart metering and grid modernization. Additionally, Centrica's focus on customer retention and cost savings initiatives have contributed to the segment's growth.

Centrica Energy

Expected Growth: 4.65%

Centrica Energy's 4.65% growth is driven by increasing demand for natural gas and electricity in the UK, coupled with the company's strategic focus on cost reduction and operational efficiency. Additionally, investments in renewable energy sources and expansion into new markets have contributed to the segment's growth.

Reconciling Items

Expected Growth: 4.83%

Centrica plc's 4.83% growth is driven by increasing demand for energy-efficient solutions, strategic acquisitions, and cost savings initiatives. Additionally, the company's focus on renewable energy sources and expansion into new markets have contributed to its growth. Furthermore, effective management of energy prices and hedging strategies have helped to mitigate risks and boost profitability.

Centrica Business Solutions

Expected Growth: 10.27%

Centrica Business Solutions' 10.27% growth is driven by increasing demand for energy-efficient solutions, expansion into new markets, and strategic partnerships. The segment benefits from Centrica plc's diversified energy portfolio, enabling it to offer integrated energy management services to commercial and industrial customers. Additionally, investments in digital technologies and data analytics enhance customer engagement and optimize energy usage.

Bord Gais Energy

Expected Growth: 4.83%

Bord Gais Energy's 4.83% growth is driven by increasing demand for energy-efficient solutions, strategic expansion into the Irish market, and effective cost management. Additionally, Centrica plc's strong brand reputation and investments in digital infrastructure have contributed to the segment's growth.

British Gas Services & Solutions

Expected Growth: 4.73%

British Gas Services & Solutions' 4.73% growth is driven by increasing demand for energy-efficient solutions, government incentives for low-carbon initiatives, and strategic partnerships to expand its smart home offerings. Additionally, Centrica's focus on digitization and cost savings has improved operational efficiency, enabling investments in growth initiatives.

Upstream

Expected Growth: 4.15%

Centrica plc's upstream segment growth of 4.15% is driven by increased production from existing assets, successful exploration and development activities, and strategic acquisitions. Additionally, favorable commodity prices, improved operational efficiency, and a strong focus on cost reduction have contributed to this growth.

7. Detailed Products

British Gas Energy

Supply of gas and electricity to residential and business customers

British Gas Home Services

Installation, maintenance and repair of boilers, central heating systems and appliances

Dynamics

Smart home technology and energy management solutions

Centrica Business Solutions

Energy management and procurement services for large businesses

Centrica Storage

Gas storage facilities for the UK energy market

Exploration and Production

Oil and gas exploration and production operations

8. Centrica plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Centrica plc operates in the energy industry, where substitutes are limited. However, there is a growing trend towards renewable energy sources, which could pose a threat to the company's traditional business model.

Bargaining Power Of Customers

Centrica plc operates in a highly competitive market, but its large customer base and diversified product offerings give it a strong bargaining position.

Bargaining Power Of Suppliers

Centrica plc relies on a diverse range of suppliers for its energy products, which gives it some bargaining power. However, the company is also exposed to fluctuations in global energy prices, which can impact its profitability.

Threat Of New Entrants

The energy industry is highly regulated, and new entrants face significant barriers to entry, including high capital costs and complex infrastructure requirements.

Intensity Of Rivalry

The energy industry is highly competitive, with many established players competing for market share. Centrica plc faces intense rivalry from companies such as British Gas, EDF Energy, and npower.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	49.26%
Debt Cost	9.43%
Equity Weight	50.74%
Equity Cost	9.43%
WACC	9.43%
Leverage	97.09%

11. Quality Control: Centrica plc passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

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

Kenon

A-Score: 7.5/10

Value: 3.5

Growth: 6.0

Quality: 5.8

Yield: 10.0

Momentum: 10.0

Volatility: 9.7

1-Year Total Return ->

ACEA

A-Score: 6.6/10

Value: 5.8

Growth: 5.6

Quality: 4.9

Yield: 8.1

Momentum: 7.0

Volatility: 8.3

1-Year Total Return ->

Capital Power

A-Score: 6.6/10

Value: 4.7

Growth: 6.3

Quality: 3.1

Yield: 9.0

Momentum: 8.5

Volatility: 7.7

1-Year Total Return ->

A2A

A-Score: 6.6/10

Value: 7.6

Growth: 6.4

Quality: 3.8

Yield: 7.5

Momentum: 5.0

Volatility: 9.0

1-Year Total Return ->

Centrica

A-Score: 5.9/10

Value: 6.5

Growth: 5.6

Quality: 3.5

Yield: 3.1

Momentum: 9.0

Volatility: 8.0

1-Year Total Return ->

EVN

A-Score: 5.9/10

Value: 6.6

Growth: 6.6

Quality: 5.6

Yield: 5.6

Momentum: 2.5

Volatility: 8.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

1.59%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.43%

Centrica plc - GB00B033F229

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on CNA

1.c. Company Highlights

Better Quality

Cheaper

Stable Momentum

Average Growth

Lower Growth

Weak Momentum

Revenues Miss

Medium Volatility

Earnings Miss

Average Yield

Revenues Beats

Strong Momentum

Average Quality

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.24%)

6. Segments

British Gas Energy

Expected Growth: 4.83%

Centrica Energy

Expected Growth: 4.65%

Reconciling Items

Expected Growth: 4.83%

Centrica Business Solutions

Expected Growth: 10.27%

Bord Gais Energy

Expected Growth: 4.83%

British Gas Services & Solutions

Expected Growth: 4.73%

Upstream

Expected Growth: 4.15%

7. Detailed Products

British Gas Energy

British Gas Home Services

Dynamics

Centrica Business Solutions

Centrica Storage

Exploration and Production

8. Centrica plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Centrica plc passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.69$

Current Price

1.69$

Potential

12.e Scoring ^Insights

12.f DCF ^BETA