Drax (DRX) 811p

Gain to Date: 21.6%

Original entry point: Buy at 667p on 10 March 2022

It is pleasing to see the shares perform well, but arguably the gains are supported by continued improvement in the fundamentals of the business.

A strong first quarter prompted Longspur Research analyst Adam Forsyth to raise his 2022 earnings per share forecast by 16% to 70.9p and his 2023 forecast by 12% to 98.9p.

The shares trade on 8.2 times 2023 forecast earnings compared with 7.8 times two months ago, yet that rating continues to look cheap relative to the firm’s long-term growth outlook.

Drax (DRX) said electricity prices remained high through the quarter.

With continued momentum also seen in ancillary services revenues, Drax raised its 2022 guidance and now anticipates earnings before interest, tax, depreciation and amortisation to be at the top end of analysts’ forecasts.

According to company-compiled data, the range for 2022 EBITDA is between £540 million to £606 million with the consensus at £571 million.

The company is also making good progress on expanding its wood pellet production capacity and completed the commissioning of its 360,000-tonne plant at Demopolis, Alabama and its 40,000-tonne satellite plant in Leola, Arkansas.

SHARES SAYS: ⎛

The shares remain a ‘buy’. [MGam]

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