Origin Energy Ltd (ASX: ORG)

Origin Energy Ltd is an an integrated energy entity, engages in the exploration and production of natural gas, electricity generation, wholesale and retail sale of electricity and gas, and sale of liquefied natural gas in Australia and internationally.

Recommendation Rationale – SELL at AUD 9.100

• Technical Indicator: The momentum oscillator 14-Day RSI (~63.18) is approaching the overbought zone; and thus, prices can face correction in the short term.
• Lower Gross Margin: During H1 FY24, ORG’s gross margin was 22.9%, while industry median is 61.7%.
• EBITDA Forecast: For FY25, EBITDA for Energy Markets is expected to be lower than FY24, due to a reduction in electricity gross profit as regulated customer tariffs declined.
• Energy Markets Performance: During H1 FY24, ORG witnessed an increase in cost to serve, primarily reflecting higher bad and doubtful debts.

Daily Chart

(Source: REFINITIV, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY24E) (Illustrative)

Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 9.100, at 10:00 AM AEDT, as of 18 March 2024.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 18 March 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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