Arise - Own production capacity should increase - ABG

Q4 results
Arise delivered sales of SEK 106m, which was 10% below our expectations of SEK 118m. Kölvallen contributed with revenue recognition, helping the Development and Solutions' revenues to SEK 40m. Own production sales came in at SEK 68m, with a realised price of SEK 850 per MWh. Group EBIT was SEK 37m, well below our expectations of SEK 51m, due to higher unallocated costs than expected. All in all, this resulted in a net profit of SEK 36m compared to our forecast of SEK 43m.

We raise '23e EBIT by 28%, lower '24e by 17%
We raise EBIT in '23e by 28% and lower '24e EBIT by 17%. The main deviation is that we now expect a higher EBITDA from the development segment, while we have adjusted the EBITDA contribution from production slightly lower. The company has hedged ~115 GWh in '23, about ~34% of its budgeted annual production. In Q1'23, the company has hedged 34.5 GWh at a price of EUR 129/MWh. This is below Q4 levels, when the company hedged 48.6 GWh and at a higher price compared to the Q4 price of EUR 104/MWh. Due to continued high electricity price volatility the hedges have burdened earnings in the last few quarters, but we expect this to improve in the coming quarters, as we leave winter behind.

Early-stage portfolio of >3,000 MW
Arise has a project portfolio of >3,000 MW, an increase of ~400 MW from Q3'22, with ~300 MW in late-stage development (~11% of the total portfolio). We have added Lebo's capacity, which the company is developing on their own books, to own production from Q1'25e. This should add ~20 GWh per quarter. However, we have not added the 9% still owned in Kölvallen as we await more updates on how the project is developing. The share is trading at 10x P/E on 2023e and we reiterate our fair value range of SEK 80-130.

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