Tion published strong preliminary FY 2022 sales figures, which grew by 54% yoy to € 33.7m, in line with the company's guidance of € 30-40m. This was mainly driven by the steep increase of power generation: +144% yoy to 302 GWh. Due to electricity price caps established across Europe in December 2022, roughly € 0.1m will still be skimmed off. The gap to our old estimates of € 36.4m is mainly stemming from the sale of Czech solar parks (7.5 MW installed capacity and roughly € 20m enterprise value)  and the related reclassification of related revenues as "discontinued operations" to the tune of € 3.9m. Adjusting for this, Tion slightly beat our estimates of € 32.5m.

2023, off to a good start. Thanks to above-average wind velocities in January, above-average solar irradiation in February and electricity prices above the contractually guaranteed minimum remuneration for part of the portfolio, Tion was able to already generated € 4.9m sales (excl. skimmed off parts) year to date. This is further supported by high feed-in-tariffs of on average € 218/MWh (eNuW) granted to its solar parks in Germany, which account for roughly 20% of the group's capacity.

As Tion is still in final negotiations regarding the potential sale of its 159 MW production portfolio, we continue to reflect the associated revenues in our estimates. So far, we also don’t yet include revenues from the 8MW battery storage system in our estimates as the project is still under construction. We will adjust our model accordingly once the deal closes, which should take place towards the end of H1, in our view.

Final valuation is likely to come in at the upper end of the range. Mind you, both parties have agreed on an equity valuation of € 145m to 177m, depending on different price scenarios. Given the current high electricity price curve, we would expect the final valuation to settle around € 168m.

Tion seems substantially undervalued. The current market capitalization is only € 111m. Even if the production portfolio would be sold at the lower end of the range, Tion would be debt free, sitting on €145m of cash and owning a 18% stake in Clearvise, which is currently worth around € 30.5m. On top, its 5 GW battery and solar project pipeline and the battery project that is already under construction (8 MW) would be valued at zero.

Therefore, Tion remains a BUY with an unchanged PT of € 45.50 based on a SOTP.