Exelon (EXC) PT Raised to $47 at BofA Securities on the Potential for a Carbon Free Spin-Off
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BofA Securities analyst Julien Dumoulin-Smith raised the price target on Exelon (NASDAQ: EXC) to $47.00 (from $45.00) on the potential ESG re-rating opportunity through a proposed spin of its nuclear assets. Besides the core value of the business, the analyst assesses a scarcity value to the effectively ‘carbon-free’ utility, suggesting a clear incentive to ultimately carry forward with existing plans even under a new administration.
The analyst reiterated a Buy rating, stating "While we still remain cautious on any meaningful near-term changes, the threat of future carbon regs could ultimately be a positive for EXC’s nuclear plants (Byron and Dresden, most urgently) given greater onus on IL to keep the nuclear plants running, even if only driven by uncertainty of future regulations." He went on to discuss the PT increase, stating "We reflect a MtM of commodities and raise our utility ests slightly. In our SOTP valuation, we roll forward Generation by a year to 2023. Given our perception of declining risk for the nuclear plants, we reduce our discount rate slightly to ~14% from ~15%. We also raise premiums for renewable assets, now ascribing a 10x EV/FCF multiple to hydro and 14x to wind. We raise our ‘21 EPS to $2.94/sh; $2.02 utility EPS compares to the $1.95-$2.25 guidance range implied by the existing 6-8% CAGR."
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