As electricity futures reach new highs and exert upward pressure on wholesale pricing, Morgans points out Origin Energy needs to hedge using financial contracts.
It’s not clear to the analyst how much of a hedging shortfall the company might have during FY24, which could raise the cost of supply considerably. Given the uncertainty, the expectation for special dividends has been reduced.
There could be further downside to Morgans forecasts should spot prices not ease during the 1H of FY23, or become sharply tighter as winter intensifies. The Hold rating is retained, while the target price falls by -8% to $6.17.
Sector: Utilities.
Target price is $6.17.Current Price is $5.87. Difference: $0.30 – (brackets indicate current price is over target). If ORG meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges – negative figures indicate an expected loss).
