(News Bulletin 247) – The American bank has raised its advice to buy the Channel Tunnel operator, believing that its volumes will improve and that its competitors, i.e. the ferry companies , will be penalized by their inclusion in the European carbon market.

After posting strong first-quarter earnings last week, which was greeted by a 2.8% rise in the stock, Getlink continues to enjoy market favor.

The operator of the Channel Tunnel wins 3.1% on Monday, at 16.34 euros around 3:40 p.m., signing one of the strongest increases in the SBF 120. The company managed by Yann Leriche benefits from an increase in recommendation from Goldman Sachs, which went from “neutral” to “buy” on the action, while raising its target price to 20 euros against 18 euros previously.

The American bank notes that the volumes of goods trucks and passenger vehicles transported by the company’s shuttles remained, in the first quarter, in sharp decline compared to the same period of 2019 (the last year not to have been affected by the pandemic), 27% for trucks and 19% for passenger vehicles.

But given the encouraging data on travel that Goldman Sachs was able to compile, and the positive feedback from Getlink on traffic during the Easter holiday, the bank expects an improvement for the next few quarters. In the end, according to her, traffic for goods trucks should be 17% lower this year than in 2019, a figure which would drop to 13% for passenger vehicles.

Competitors penalized by carbon emissions

Above all, Goldman Sachs sees tailwinds for the action in the medium term. The bank cites a potential improvement in economic and commercial relations between the United Kingdom and the European Union, which obviously would favor the company’s traffic.

In addition, Goldman Sachs believes that Getlink’s main competitors, i.e. ferry companies and, to a lesser extent, airlines with short-haul flights, will be penalized by stricter rules of the European carbon emissions market. Ferry companies will in particular be gradually included in this market, called EU Emissions Trading Systems (ETS).

Concretely, in 2025 ferry operators will have to pay the equivalent of 40% of their Co2 quota emissions for 2024, a figure which will increase to 100% for the year 2027 for 2026 emissions. Airlines will , they will gradually lose their free quotas on intra-European flights which they have benefited from until now, starting in 2024.

For Goldman Sachs, these elements should benefit “competitiveness and ‘pricing power’ [pouvoir de fixation des prix, NDLR] of Getlink, particularly if carbon prices continue to rise”.

The bank also believes that Getlink could benefit in the medium to long term from the expansion of high-speed rail in the Channel Tunnel, with more rail operators, beyond just Eurostar, using this route. She cites the Spanish Renfe as an example.

The bank also raised the contribution to the results of ElecLink, the cable allowing electrical interconnections, which was deployed in May 2022. Goldman Sachs estimates that it will bring 1.3 billion euros in gross profit. (Ebitda) between 2022 and 2025, nearly six times its previous forecast.