It’s Not Quite Tesla, But This Smart-Grid Stock Is Still Impressive

(Bloomberg) -- The surge in Alfen Beheer BV’s shares has forced some hard decisions for analysts: boost their price targets on the developer of smart electrical grids or pull their buy ratings from one of the best-performing stocks in a hot sector.

For now, they’re choosing to boost their targets. The problem is, they can’t keep up with the stock. It’s more than doubled in the past year, caught up in a market frenzy around companies that might benefit from the transition to cleaner, more efficient energy use.

Three of the four brokerages that follow the Dutch company recommend buying the stock. Two of them raised their price targets in the past month but the stock has already surpassed their objectives.

Alfen, which also makes charging stations for electric vehicles and energy-storage systems, went public in 2018, just as investors began pouring cash into funds that focus on environmental, social and governance criteria. Even the world’s largest asset manager, BlackRock Inc., recently said it is remodeling its investment strategy to make sustainability key.

“Alfen is well positioned to benefit from the accelerating energy transition,” Jan Richard, an analyst at Berenberg, said in an interview. Coupled with the ESG push, he counts it among the few stocks in Europe that “tick all the boxes.”

In a less-extreme version of what happened with electric-car maker Tesla Inc., Alfen’s stock surge has picked up momentum in 2020, gaining 76%.

Richard raised his price target to 26 euros last month from 22 euros, only to see the stock blow right past it. Alfen’s shares rose 2.7% to 29 euros at 9:50 a.m. Wednesday.

Kepler Cheuvreux analyst Peter Olofsen last week boosted his price target to 27.50 euros from 15 euros, citing increased estimates for the company’s growth over the next few years.

Pricey Stock

For some investors, the stock has gotten too expensive. Alfen sells for 62 times estimated earnings for the next year, compared with an average multiple of 39 times for other small European companies that make electrical equipment.

Jim Tehupuring, owner of Netherlands-based investment research company ProBeleggen, said he wouldn’t buy the stock at this price.

“They over-delivered with very strong half-year results,” he said. Alfen reported impressive gross margin and the management was optimistic at its capital markets day in October, he said. ProBeleggen doesn’t hold a position in Alfen, which has a market value of 581 million euros ($635 million).

There has also been more stock available for trading since November, after Alfen’s largest shareholder, Infestos, sold 1.5 million shares to institutional investors. Infestos pared its stake in Alfen to about 35.2%.

Alfen expects to benefit further from the long-term trends around energy transition. In October, it reaffirmed its 2019 forecast for revenue of 135 million euros to 145 million euros, while outlining international expansion and cross-selling of businesses as priorities for 2020.

The company, which reports full-year earnings on Feb. 19, declined to comment on its stock or analyst price targets.

Kepler Cheuvreux’s Olofsen estimates the Dutch company experienced a “strong end” to 2019, driven by its vehicle-charging and energy-storage businesses, according to a note last week.

--With assistance from Gaurav Panchal.

To contact the reporter on this story: Sarah Jacob in Amsterdam at sjacob19@bloomberg.net

To contact the editors responsible for this story: Katerina Petroff at kpetroff@bloomberg.net, Phil Serafino, Celeste Perri

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