HERA (AO) | Buy | Q1 results in line with our preview and 2026 expected trend

Research evidence excerpt

HERA (AO) | Buy | Q1 results in line with our preview and 2026 expected trend

in waste, which is a very fragmented market). price increases or instalment payments for energy bills.

Catalysts Potentially dilutive acquisitions or lower industrial synergies

Visible earnings momentum. Plan delivery. Acquisitions. than expected.

Around EUR1bn of possible re-leverage at 3/3.3x net Operating margin squeeze in retail energy supply business due

debt/EBITDA. to competition. Slower-than-expected customer shift into

Faster increase in customer base profitability of STG customers liberalised market contracts for the c. 1m clients won in the

won in auctions. auctions for full liberalisation of electricity market.

Key data charts

Price performance Sales split by region Sales split by division

SWOT analysis

Strengths Weaknesses

Safe profile thanks to business diversification, BP over-delivery. Lower dividend yield than other Italian utilities.

Low volatility: c. 40% of EBITDA is regulated and c. 65% contracted. Enlarged presence in gas retail and distribution, which are mature.

Experienced and credible management team, with strong track record. Operating margin pressure in energy supply/retail business.

Financial structure under-leveraged (up to EUR1bn firepower). Slower organic growth in 2026-27 than the historical average and BP.

Opportunities Threats

Growth in waste thanks to increasing demand for recycled materials. Lower profitability from 0.8m customers in Gradual Protection Service.

Sector consolidation in energy supply and waste (>200 targets). Potential overhang if municipalities decide to decrease their stakes.

Extensions of the current concessions in regulated networks. Changes in regulation. Higher tax rate on utility businesses.