10th Oct 2024. 9.03am

Regency View:
BUY Yü Group (YU.)

Regency View:
BUY Yü Group (YU.)
Yü Group: Powering ahead in the business energy market
Fast-growing business energy provider Yü Group (YU.) has been one of AIM’s standout stars over the past five years.
We snapped up two tranches of the stock in 2022 and enjoyed substantial profits a year later. After a prolonged period of consolidation in its price chart and an impressive set of half-year results, we believe the time is right to buy back in.
Who is Yü Group?

Yü Group is a dynamic player in the business energy market, providing straightforward, comprehensive multi-utility plans for gas, electricity, and water. They focus on delivering simple, fixed-price utility solutions combined with excellent customer service, helping businesses save time and money.
Yü Group’s innovative online portal and multi-channel customer support enhance the overall experience, ensuring that clients receive the best service possible.
Strong financial performance
In the first half of 2024, Yü Group achieved an eye-catching 60% increase in revenue, reaching £312.7 million. This growth is primarily driven by organic expansion in meter points and a significant 110% boost in energy volume supplied to customers. Adjusted earnings (EBITDA) jumped by 49% to £20.4 million, reflecting effective operational management, even as the EBITDA margin slightly declined to 6.5% from 7.0% the previous year.
Earnings per share (EPS) increased by an impressive 52% to 88p, showcasing the company’s ability to enhance shareholder value. With a strong net cash position of £86.8 million and a net cash inflow of £56.9 million—including £49.8 million returned from a previous hedging counterparty—Yü Group is well-equipped for future growth and capital distributions.
A clear growth strategy
Chief Executive Officer Bobby Kalar has emphasised the company’s commitment to organic growth and a digital-first approach, particularly through the expansion of their smart metering business, Yu Smart. With a 125% increase in smart meter installations—up to 9,000 in the first half of 2024—Yü Group is well on its way to achieving its ambitious target of 25,000 new meter installations for the year.
The company’s recent five-year commodity trading agreement with Shell enhances its operational maturity and opens up new opportunities for growth, further solidifying its competitive position in a recovering market.
Positive outlook
Looking ahead, Yü Group is optimistic about maintaining substantial revenue growth, driven by its existing forward contract book and organic expansion. The company aims for a target of 100,000 meters supplied by early 2025, alongside continued growth in smart meter installations and energy supply volume for the coming years.

With the board committed to a progressive dividend policy—planning for a material increase in the interim dividend from 3p to 19p per share— we can expect attractive returns in addition to capital appreciation.
Attractive valuation metrics
When it comes to valuation, Yü Group stands out with a forward price-to-earnings (P/E) ratio of 7.2, which compares favorably to sector peers and the broader market. The forecasted EPS growth of 10.8% is promising, and the PEG ratio of 0.7 suggests that the stock is undervalued relative to its growth potential. Furthermore, investors can look forward to a forward dividend yield of 4.26%, providing an attractive return on investment.
Yü Group’s high-quality financial profile is reflected in its price chart, which displays a long-term uptrend. Price action this year has seen the shares undergo a prolonged period of consolidation, taking the price back to the 200-day moving average. These long and drawn-out consolidation phases are a perfectly normal part of any established trend, often presenting attractive entry points for investors.

Currently, with prices trading near the July swing lows, the risk/reward ratio looks appealing from a technical perspective. This position suggests potential for upward movement as the stock prepares to resume its long-term uptrend.
Other key metrics include:
- Price to Free Cash Flow: 4.0
- Price to Sales: 0.43
- Enterprise Value to EBITDA: 3.47
Yü Group also boasts an impressive return on capital of 67.5% and an eye-popping return on equity of 103.0%. With an operating margin of 8.19%, the company ranks 3rd out of 5 in the Multiline Utilities market, highlighting its competitive edge.
In summary, Yü Group is well-positioned for continued growth, backed by strong financial performance and a clear strategy focused on organic expansion and digital innovation. With attractive valuation metrics we believe the time is right to buy back in.
Disclaimer:
All content is provided for general information only and should not be construed as any form of advice or personal recommendation. The provision of this content is not regulated by the Financial Conduct Authority.