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Scatec (OB:SCATC) has reached financial close and started building the 130 MW Barzalosa solar plant in Colombia. The project is backed by a 15-year PPA that covers most of the project’s expected output.
See our latest analysis for Scatec.
Alongside Barzalosa, Scatec has reported a series of project milestones in Egypt and South Africa, and the share price has responded with a 23.2% 90 day share price return and a 51.4% 1 year total shareholder return on the way to NOK122.6.
If this kind of renewables build out has your attention, it could be worth scanning our 23 power grid technology and infrastructure stocks as a starting point for finding other grid focused infrastructure names.
With Scatec delivering new PPAs in Colombia, Egypt and South Africa and the share price already at NOK122.6, is this an undervalued renewables builder or a stock where the market is already pricing in future growth?
Scatec’s widely followed narrative pegs fair value at NOK129.57 per share, a little above the last close of NOK122.60, which sets up quite a tight valuation debate.
The analysts have a consensus price target of NOK116.0 for Scatec based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK135.0, and the most bearish reporting a price target of just NOK105.0.
In order for you to agree with the analyst’s consensus, you would need to believe that by 2028, revenues will be NOK10.0 billion, earnings will come to NOK877.1 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 9.4%.
Want to see what kind of revenue curve and shrinking margins still support that higher fair value? The narrative leans on punchy top line growth and a richer future earnings multiple. Curious which assumptions really carry the model and how much disagreement sits beneath that single price target?
Result: Fair Value of NOK129.57 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, this hinges on big assumptions around fast revenue growth and richer future P/E multiples, while emerging market and policy risks could easily challenge that story.
Find out about the key risks to this Scatec narrative.
There is a clear clash between the narrative fair value of NOK129.57 and our DCF model, which points to a value of just NOK7.60 per share at NOK122.60 today. This implies Scatec appears very expensive on a cash flow basis. Which story do you think is closer to reality?
