This report is an updated version of the report published on 26 February 2025 at closing market price.

APA Group Limited (ASX: APA)

APA is an energy infrastructure business which owns, manages, and operates a portfolio of gas, electricity, solar and wind assets. The ASX-listed company delivers approximately half of the country’s gas usage. The company also owns and operates renewable power generation assets in Australia.

Recommendation Rationale – SELL at AUD 7.540

• Financial Highlights: APA's profit for the period declined by 96.8% YoY, falling to AUD 34.0mn in 1HFY25 compared to AUD 1,049.0mn in 1HFY24. This decline was primarily due to higher depreciation and amortization expenses, increased finance costs, and higher employee benefit expenses during the period. Additionally, net cash provided by financing activities decreased by 79.6% YoY, dropping to AUD 482.0mn in 1HFY25 from AUD 2,365.0mn in 1HFY24.
• Trading Near the Resistance: APA stock has surpassed its R1 level recommended on 12 February 2025. Therefore, share price can face resistance at the current levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales, Price/Earnings, Price/Book) are higher than the median of Utilities sector.
• Market Risk: APA group's strategy involves substantial investments in new projects and acquisitions, carrying risks such as project execution issues, cost overruns, integration challenges, equipment failures, accidents, and natural disasters, which could disrupt operations and cause financial losses.

APA’s Daily Price Chart

Valuation Methodology: Price/Cash Flow Approach (FY June'25E) (Illustrative)

Stock might trade at a slight premium to its peers considering the underlying EBITDA guidance for FY25, effective cost management, pipeline development agreements, east coast gas grid expansion plan. For conducting the valuation, the following peers have been considered: Mercury Nz Ltd (ASX: MCY), Duxton Water Ltd (ASX: D2O), and AGL Energy Ltd (ASX: AGL) have been considered.

Considering that the stock has surpassed its R1 level, rally in share price, current trading level, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of AUD 7.540, as of 26 February 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. 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 26 February 2025. 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.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.