Phoenix Brokerage Initiates Coverage of Prime Energy with Buy Rating

Phoenix Brokerage has initiated coverage of Prime Energy with a 'Buy' recommendation and a price target of NIS 66 per share, representing a potential upside of approximately 66% from its current market price. The recommendation is based on expectations of rapid asset growth for the company in the coming years, particularly a shift from project development to a larger portfolio of income-generating energy assets.

Phoenix analysts project that Prime Energy will significantly expand its solar photovoltaic (PV) operations in Israel and Eastern Europe by 2029, increasing its capacity sixfold. Its energy storage operations are expected to grow by a factor of 140. Without considering the Spanish acquisition, the company anticipates having approximately 1.2 gigawatts (GW) of connected solar facilities and about 9.7 gigawatt-hours (GWh) of storage facilities by the end of 2029. The completion of the Spanish asset portfolio acquisition could increase these figures to roughly 1.6 GW of solar and 16.3 GWh of storage.

According to Phoenix's model, the net present value (NPV) of Prime Energy's mature project pipeline stands at approximately NIS 2.5 billion, with assets worth about NIS 1.95 billion expected to be connected by the end of 2027. This suggests a substantial portion of the company's valuation is tied to projects in relatively advanced stages. Financially, Phoenix forecasts a significant increase in the company's scale, with annual revenues projected to rise from around NIS 129 million currently to approximately NIS 423 million in 2027, NIS 1.06 billion in 2028, and NIS 1.35 billion in a full operational year for all projects. EBITDA is forecasted to reach nearly NIS 1 billion, with a profit margin of about 77%.

A key component of the valuation includes the collaboration with Dolev Israel, part of the Lahav Group, and Dolev Real Estate, along with dual-use projects. Phoenix attributes a future contribution of approximately NIS 640 million in annual revenues and NIS 1.4 billion to the NPV from these activities. The Spanish deal, if finalized, is expected to add an estimated NIS 500 million to the company's valuation and expand its European market presence.

Phoenix concludes that the combination of its mature project pipeline, anticipated cash flow increases, and Prime Energy's transition from a development company to an income-generating energy infrastructure firm supports the NIS 66 price target. However, the analysts note that a significant part of this forecast relies on the completion of projects and connections in the coming years, as well as the finalization of the Spanish transaction, meaning the realization of the upside is contingent on meeting timelines and project maturation.