Last Update 05 Jan 26
Fair value Increased 2.20%IFT: Dividend Uplift And AI Data Centre Capacity Will Support Upside
Analysts have nudged their price target for Infratil higher to $14.02 from $13.72, reflecting updated assumptions around discount rates, long-term revenue trends, margins and a slightly higher future P/E multiple.
What's in the News
- Infratil Limited declared a cash dividend of NZ$0.08044118 per ordinary share for the six months ended 30 September 2025, with an ex date of 26 November 2025, a record date of 27 November 2025, and a payment date of 16 December 2025 (Key Developments).
- CDC plans to announce a new partnership with Firmus Technologies and NVIDIA at NVIDIA AI Day in Sydney, supported by about 40MW of CDC data centre capacity to deliver AI Factory capability at a Melbourne site, with initial delivery expected from April 2026 (Key Developments).
Valuation Changes
- Fair Value: updated from NZ$13.72 to NZ$14.02, a small uplift in the assessed value per share.
- Discount Rate: adjusted slightly from 7.61% to 7.63%, reflecting a marginal change in the required return used in the model.
- Revenue Growth: maintained effectively in line, with the long term revenue trend assumption holding at around an 8.32% decline.
- Net Profit Margin: kept essentially unchanged at about 5.52%, indicating stable expectations for underlying profitability.
- Future P/E: revised modestly higher from 93.31x to 95.39x, indicating a slightly higher multiple being applied to future earnings.
Key Takeaways
- Advancing projects and customer negotiations at CDC are expected to significantly drive future revenue growth.
- Merging Manawa Energy and Contact Energy may yield synergies beneficial for improving net margins.
- Regulatory hurdles and market shifts pose risks to revenue growth and strategic initiatives across multiple business segments, potentially impacting overall performance.
Catalysts
About Infratil- An infrastructure investment firm specializing in digital Infrastructure, renewables, and social infrastructure.
- Significant demand growth at CDC, particularly with advancing customer negotiations and ongoing investment in new projects and power capacity, is expected to drive future revenue growth.
- The ongoing merger of Manawa Energy and Contact Energy, once approved, may provide synergies beneficial for net margins.
- Successful negotiation and potential signing of contracts for 300 megawatts pre-Christmas, and further 100 megawatts in the new year, is a catalyst for future earnings growth at CDC.
- The continuous progress of One NZ on strategic priorities, including growth in mobile and wholesale revenue and IT transformations for cost efficiency, indicates potential for improved net margins and earnings.
- Longroad’s expansion plans with projects in the U.S., despite political uncertainties, suggest long-term investment in U.S. infrastructure that could significantly enhance future revenue and earnings growth.
Infratil Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Infratil's revenue will grow by 4.4% annually over the next 3 years.
- Analysts assume that profit margins will increase from -14.0% today to 7.3% in 3 years time.
- Analysts expect earnings to reach NZ$300.1 million (and earnings per share of NZ$0.33) by about May 2028, up from NZ$-508.3 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 63.6x on those 2028 earnings, up from -20.1x today. This future PE is greater than the current PE for the AU Diversified Financial industry at 30.4x.
- Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.39%, as per the Simply Wall St company report.
Infratil Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The uncertainty from the U.S. election results and potential rollbacks on green policies like the Inflation Reduction Act pose a risk to Longroad's future projects, potentially affecting the company's revenue generation and growth targets.
- The delay in securing Commerce Commission approval for the merger between Manawa Energy and Contact Energy could impact revenue synergies and market position if prolonged.
- The inability to proceed with the planned investment in Console Connect highlights potential strategic missteps or market changes that could hinder projected earnings growth in the digital infrastructure space.
- One NZ's revenue has been adversely affected by a reduction in low-margin handset sales, which, unless reversed, might continue to impact overall revenues amid a subdued economic environment.
- Changing customer requirements and contract negotiations at CDC could lead to delayed capacity coming online, affecting revenue recognition and potentially lowering expected earnings per megawatt.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of NZ$12.65 for Infratil based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NZ$14.0, and the most bearish reporting a price target of just NZ$11.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NZ$4.1 billion, earnings will come to NZ$300.1 million, and it would be trading on a PE ratio of 63.6x, assuming you use a discount rate of 8.4%.
- Given the current share price of NZ$10.55, the analyst price target of NZ$12.65 is 16.6% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.