Are Drax (LON: DRX) shares worth a buy at the current price?

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Are Drax (LON: DRX) shares worth a buy at the current price?

 Are Drax (LON: DRX) shares worth a buy at the current price?
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Highlights 

  • The global biomass heating market is set for ‘pronounced growth’ during the period between 2021 and 2028.
  • Drax, biomass focused power generation business, was named as a key player in the sector by the report.
  • The global biomass solid fuel market is projected to have a market size of US$ 425.8 billion by the end of 2027.

The global biomass heating market is set for ‘pronounced growth’ during period between 2021 and 2028, according to a recent report by market research firm Stratagem Market Insights.

The report stated that some of the key players in this sector including, Germany based utility group E.ON Energy, UK based power generation company Drax Group PLC (LON: DRX), aims to be carbon negative by 2030 and near about.

Moreover, the global biomass solid fuel market is projected to have a market size of US$ 425.8 billion by the end of 2027, at a CAGR of 8.5 per cent, according to a report published earlier this year by research company Coherent Market Insights.

Given the growth potential of the biomass sector, let us take a closer look at the investment prospects of Drax Group:

Drax’s recent capital markets day update

The group laid out new targets for its biomass pellet production in its capital markets day update. It now plans to have a production of 8Mt per year by 2030, up from its current production of 4Mt per annum.

By 2030, the group also targets its biomass pellet sales to third parties to reach 4Mt per year, compared to 2Mt per year.

The group aims to reach 8Mt per annum by 2030 for its bioenergy with carbon capture and storage (BECCS) at Drax Power Station.

Drax said it would maintain its biomass production cost of US$ 100/t as part of its biomass cost reduction goals. Furthermore, the group plans to invest about £3 billion across pellet production, UK’s BECCS and other areas between 2022 and 2030.

Drax Group PLC (LON: DRX) share price performance

Drax shares closed at GBX 582.00 on 10 December. Meanwhile, the FTSE 250 index was at 22,927.71. (Drax is a part of the FTSE 250 index)

Image source: Refinitiv

The group’s market cap was at £2,323.45 million on Friday. Its year-to-date return to shareholders was at 55.20 per cent, and its one-year return stood at 76.36 per cent as of 10 December.

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