Hera S.p.A. (HER.MI) | Investment Case

1. Company Snapshot

1.a. Company Description

Hera S.p.A., a multi-utility company, engages in the waste management, water services, and energy businesses in Italy.It engages in the sale and distribution of methane and natural gas, as well as in the district heating and heating management business; generation, distribution, and sale of electricity; aqueduct, purification, and sewage services related to water; waste collection, treatment, recycling, and disposal services; and provision of public lighting, telecommunications, and other services.The company's water services include activities related to water collection, drinking water treatment, and distribution for civil and industrial applications, as well as sewerage and sewage treatment activities; and environmental services comprise sweeping, waste collection, transport, and recovery and disposal.

It manages water services in 227 municipalities and serves a catchment area of approximately 3.6 million inhabitants with a water network of 35.080 kilometers; and provides gas with a network covering approximately 19,953 kilometers.The company was founded in 2002 and is headquartered in Bologna, Italy.

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1.b. Last Insights on HER

Hera S.p.A.'s recent performance has been driven by subtle yet meaningful shifts in its share price, prompting investors to reevaluate the company's valuation. With no dramatic headlines to explain the latest trading patterns, a deeper look at the company's fundamentals is warranted. The Italian utility company's stable business conditions and solid operational performance have likely contributed to its positive momentum. Additionally, Hera's focus on sustainable development and investments in renewable energy may be attracting investors seeking long-term growth.

1.c. Company Highlights

Last Price	4.02
Change Percentage	-0.45%
Open	4.03
Previous Close	4.04
Market Cap ( Millions)	5904
Volume	2299409
Year High	4.47
Year Low	3.31
M A 50	3.98
M A 200	3.95

FCF Yield	5.58%
Dividend Yield	3.73%
ROE	13.62%
Debt / Equity	138.53%
Net Debt / EBIDTA	270.76%
Price To Book	1.54
Price Earnings Ratio	11.56
Price To FCF	17.91
Price To sales	0.41
EV / EBITDA	6.73

2. Transcript Summary

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3. NewsRoom

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.95%)

6. Segments

Gas

Expected Growth: 0.8%

Hera S.p.A.'s 0.8% growth in Gas segment is driven by increasing demand for clean energy, government incentives for renewable energy sources, and strategic investments in infrastructure development, particularly in the Italian market. Additionally, the company's focus on energy efficiency and cost reduction initiatives has contributed to the growth.

Power Electric

Expected Growth: 1.2%

Power Electric from Hera S.p.A. growth driven by increasing demand for renewable energy, government incentives for sustainable infrastructure, and strategic acquisitions expanding market share. Additionally, investments in grid modernization and electrification of transportation contribute to the 1.2% growth rate.

Waste Management

Expected Growth: 0.9%

Hera S.p.A.'s Waste Management segment growth of 0.9% is driven by increasing waste volumes, regulatory support for waste-to-energy and recycling, and cost savings from operational efficiencies. Additionally, investments in digitalization and process optimization contribute to margin expansion, while a growing focus on circular economy and sustainability supports long-term growth prospects.

Water Cycle

Expected Growth: 1.1%

Hera S.p.A.'s Water Cycle segment growth of 1.1% is driven by increasing water demand, efficient network management, and investments in infrastructure development. Additionally, the company's focus on water conservation and leak detection, as well as its efforts to reduce energy consumption, contribute to the segment's growth.

Other Services

Expected Growth: 0.7%

Hera S.p.A.'s Other Services segment growth of 0.7% is driven by increasing demand for energy efficiency solutions, expansion of public lighting services, and investments in digitalization and innovation, offsetting declining revenues from traditional services.

7. Detailed Products

Water Distribution

Hera S.p.A. provides water distribution services, managing the entire water cycle, from production to distribution, ensuring a continuous and efficient supply of water to households and businesses.

Waste Management

Hera S.p.A. offers waste management services, including collection, transportation, and disposal of waste, promoting a sustainable and environmentally friendly approach.

Energy Distribution

Hera S.p.A. distributes energy, including electricity and gas, to households and businesses, ensuring a reliable and efficient supply.

Public Lighting

Hera S.p.A. provides public lighting services, designing, installing, and maintaining public lighting systems, ensuring safety and energy efficiency.

Heat Management

Hera S.p.A. offers heat management services, providing heating and cooling solutions to households and businesses, promoting energy efficiency and sustainability.

8. Hera S.p.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Hera S.p.A. is medium due to the presence of alternative energy sources such as solar and wind power.

Bargaining Power Of Customers

The bargaining power of customers for Hera S.p.A. is low due to the lack of alternative energy providers in the region.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Hera S.p.A. is medium due to the presence of multiple suppliers of energy sources.

Threat Of New Entrants

The threat of new entrants for Hera S.p.A. is high due to the increasing trend of renewable energy and the ease of entry into the market.

Intensity Of Rivalry

The intensity of rivalry for Hera S.p.A. is high due to the presence of multiple energy providers in the region, leading to intense competition.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	57.59%
Debt Cost	4.61%
Equity Weight	42.41%
Equity Cost	7.92%
WACC	6.01%
Leverage	135.78%

11. Quality Control: Hera S.p.A. passed 3 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

Iren

A-Score: 6.7/10

Value: 7.1

Growth: 5.6

Quality: 3.4

Yield: 7.5

Momentum: 8.0

Volatility: 8.7

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 ->

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 ->

Hera

A-Score: 6.5/10

Value: 6.8

Growth: 5.7

Quality: 3.9

Yield: 6.9

Momentum: 6.0

Volatility: 9.7

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 ->

EDP

A-Score: 5.9/10

Value: 6.5

Growth: 3.4

Quality: 3.4

Yield: 7.5

Momentum: 6.0

Volatility: 8.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

10.31%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.01%

Hera S.p.A. - IT0001250932

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on HER

1.c. Company Highlights

Higher Growth

Strong Momentum

Average Quality

Revenues Miss

Average Yield

Medium Volatility

Stable Momentum

Fairly Valued

Cheaper

Revenues Beats

Higher Yield

Less Volatile

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.95%)

6. Segments

Gas

Expected Growth: 0.8%

Power Electric

Expected Growth: 1.2%

Waste Management

Expected Growth: 0.9%

Water Cycle

Expected Growth: 1.1%

Other Services

Expected Growth: 0.7%

7. Detailed Products

Water Distribution

Waste Management

Energy Distribution

Public Lighting

Heat Management

8. Hera S.p.A.'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: Hera S.p.A. passed 3 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

4.02$

Current Price

4.02$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA