The S&P/ASX 200 Index (ASX: XJO) stock AGL Energy Ltd (ASX: AGL) has suffered a major decline of profit over the last few years. However, it's projected that the business could see profit turnaround in FY24.
As we can see on the chart above, the AGL share price is still down by more than 44% over the past five years. It is perhaps unsurprising that the valuation has fallen so much, given the profit has gone downhill.
In FY21, AGL made $535 million of net profit after tax (NPAT), which dropped to $291 million in FY23. That means the ASX 200 stock's profit almost halved over two years.
Let's look at how the AGL financials are expected to turn around in FY24 and beyond.
FY24 profit projection
One financial year has just ended, but we don't know the numbers yet.
Broker UBS expects a sizeable turnaround for the business. AGL itself has been indicating throughout the last 12 months that profit is expected to rebound.
UBS has forecast that in FY24, AGL could generate $12.9 billion in revenue, $1.4 billion in earnings before interest and tax (EBIT) and an NPAT of $785 million. The ASX energy share is forecast to make $1.17 of earnings per share (EPS) and pay an annual dividend per share of 58 cents.
That NPAT figure, if correct, would represent year over year growth of 179% for the ASX 200 stock.
Those numbers come as UBS expects the ASX 200 stock to generate solid cash flow from its lowest-cost thermal coal energy generation in the country, providing "strong leverage to rising wholesale electricity prices".
The broker recently lifted its estimates for wholesale electricity prices as it recognised "strong asset flexibility and availability and higher costs associated with AGL's planned $300 million retail transformation program over the next four years".
Long-term profit growth projected for the ASX 200 stock
Short-term profits may be volatile as profitability depends on what happens with electricity prices. From FY29 onwards, UBS expects AGL to benefit from annual pre-tax cash savings of at least $70 million per annum from the retail transformation program.
In FY28, the broker predicts that the ASX 200 energy stock's NPAT will be materially higher at $887 million and that it could pay an annual dividend per share of 82 cents.
Those forecast numbers suggest the AGL share price is valued at 8x FY28's estimated earnings, with a potential dividend yield of 7.7% (excluding potential franking credits).
