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Drax Group plc (GB:DRX)
:DRX
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Drax Group plc (DRX) AI Stock Analysis

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GB:DRX

Drax Group plc

(LSE:DRX)

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Outperform 75 (OpenAI - 4o)
Rating:75Outperform
Price Target:
742.00p
▲(9.76% Upside)
Drax Group plc's overall score reflects its strong financial performance and attractive valuation, supported by positive earnings call insights. However, technical indicators suggest potential bearish momentum, and challenges in revenue growth and market conditions pose risks.

Drax Group plc (DRX) vs. iShares MSCI United Kingdom ETF (EWC)

Drax Group plc Business Overview & Revenue Model

Company DescriptionDrax Group plc, together with its subsidiaries, engages in renewable power generation in the United Kingdom. The company operates through three segments: Generation, Customers, and Pellet Production. The Generation segment provides renewable, dispatchable power, and system support services to the electricity grid. The Customers segment offers non-generation system support and energy management services. The Pellet Production segment provides low carbon fuel. The company owns and operates Drax Power Station with an installed capacity of 2,000 megawatts (MW) located in Selby, North Yorkshire; Cruachan Power Station, a pumped hydro storage station, with an installed capacity of 440 MW located in Argyll and Bute, and Lanark and Galloway hydro-electric power stations with an installed capacity of 126 MW located in southwest Scotland. In addition, the company owns and operates Daldowie fuel plant that processes sludge, a plant that converts it into dry low-odour fuel pellets. Further, it manufactures and sells compressed wood pellets; and supplies renewable electricity. Drax Group plc was incorporated in 2005 and is based in Selby, the United Kingdom.
How the Company Makes MoneyDrax Group generates revenue through multiple key streams, primarily from electricity generation and energy trading. The company earns significant income from selling electricity to the National Grid and other energy suppliers. Additionally, Drax has established a strong position in the biomass market, generating revenue from the production and supply of biomass fuel, which is used in its power stations. The company's revenue model is further supported by long-term contracts and partnerships, particularly in renewable energy initiatives, which provide stable cash flows. Factors contributing to its earnings include government incentives for renewable energy production, the growing demand for low-carbon energy solutions, and its strategic investments in biomass and other renewable technologies.

Drax Group plc Earnings Call Summary

Earnings Call Date:Jul 31, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Feb 26, 2026
Earnings Call Sentiment Positive
The earnings call reflects a strong operational and financial performance with significant progress on government agreements, substantial shareholder returns, and future growth opportunities. Challenges remain with reduced biomass earnings, potential pellet market oversupply, and project delays.
Q2-2025 Updates
Positive Updates
Strong Performance in Renewable Power and Pellet Production
The company delivered a strong performance in the first half of the year, producing more power than last year and accounting for 5% of U.K. power and 11% of U.K. renewables. Record level of pellet production increased by 5% from last year, driving increased EBITDA in the pellet business.
Significant Progress on Low-Carbon Dispatchable CfD
Agreement with the U.K. government for a low-carbon dispatchable CfD covering all 4 units at Drax Power Station through March 2031. Legislation enabling this agreement is now in place, with the CMA's review of the subsidy regime complete.
Strong Financial Performance and Shareholder Returns
Adjusted EBITDA of GBP 460 million with an 11.5% increase in dividends per share for 2025. Share buyback program extended by GBP 450 million over three years.
Future Growth and Investment Opportunities
Plans to invest in expanding the pump storage assets, exploring battery storage, and exploring data center opportunities with a 100-megawatt development potential.
Negative Updates
Reduction in Biomass Generation Earnings
Earnings reduced to GBP 332 million primarily due to a lower all-in achieved power price, partially offset by a reduction in amounts due for the energy generators levy.
Challenges in Pellet Market
Future market expected to be long on pellets with a potential oversupply, creating risks for pellet production business.
Delay in Open Cycle Gas Turbine (OCGT) Assets
Commissioning of the first OCGT asset delayed to the end of the year, with further delays for the Millbrook project to 2026.
Company Guidance
In the recent call, the company provided an extensive overview of its financial performance and strategic outlook, highlighting key metrics for guidance. The company maintained its target of GBP 600 million to GBP 700 million in EBITDA from its FlexGen, Pellet Production, and Drax Power Station operations post-2027. It reported a record level of pellet production, up 5% from the previous year, contributing to increased EBITDA in its pellet business. The company's adjusted EBITDA for the first half was GBP 460 million, despite a decrease in the all-in achieved power price for biomass generation. The firm is pursuing a three-year, GBP 450 million share buyback program, supported by a working capital inflow related to the end of the renewable obligation scheme. Additionally, the company is enhancing its dividend by 11.5% for 2025 and has completed GBP 272 million of the current GBP 300 million share buyback program. The company's leverage stands at 1.1x, significantly below its long-term target of around 2x. Looking forward, the company continues to progress its low-carbon dispatchable CfD agreement with the UK government, which will cover all four units at the Drax Power Station until 2031, potentially contributing GBP 100 million to GBP 200 million of EBITDA annually. It also plans to invest in expanding its Cruachan hydroelectric facility and building new open cycle gas turbines, further supporting its strategic alignment with the energy transition.

Drax Group plc Financial Statement Overview

Summary
Drax Group plc shows strong cash generation and improving profitability, with a robust free cash flow and positive trends in EBIT and EBITDA margins. However, challenges remain in maintaining consistent revenue growth and managing leverage effectively.
Income Statement
75
Positive
Over recent years, Drax Group plc has shown a strong gross profit margin, maintaining a significant improvement from 2019 to 2024, indicating effective cost management. However, the net profit margin has been volatile, with a notable dip in 2020. Revenue growth has been inconsistent, with a decline in 2024 compared to 2023, suggesting potential market challenges or competitive pressures. The EBIT and EBITDA margins show a positive trend with some fluctuations, emphasizing operational efficiency improvements.
Balance Sheet
68
Positive
Drax Group's debt-to-equity ratio has been reasonably stable, but the company's equity ratio has experienced some pressure, reflecting a moderate level of financial leverage. The return on equity has improved significantly from 2020's negative figures to positive in recent years, indicating better profitability and use of equity. However, the equity ratio suggests a moderate reliance on debt financing, which could pose risks if not managed well.
Cash Flow
82
Very Positive
The company's cash flow from operations has shown consistent growth, with a robust free cash flow to net income ratio in recent years, demonstrating strong cash generation capabilities. Free cash flow has also grown notably, especially from 2020 to 2024, indicating efficient capital expenditure management and potential for reinvestment or debt reduction.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue5.67B6.16B8.13B7.78B5.09B4.24B
Gross Profit1.52B1.88B1.78B1.02B891.20M725.70M
EBITDA902.40M1.10B1.14B400.10M391.50M4.50M
Net Income407.70M526.60M562.20M85.10M55.10M-194.60M
Balance Sheet
Total Assets5.27B5.39B6.04B6.39B5.82B4.19B
Cash, Cash Equivalents and Short-Term Investments276.00M356.00M379.50M238.00M317.40M289.80M
Total Debt1.30B1.29B1.56B1.59B1.49B1.10B
Total Liabilities3.27B3.30B4.06B5.07B4.52B2.85B
Stockholders Equity1.99B2.08B1.97B1.31B1.29B1.34B
Cash Flow
Free Cash Flow517.30M472.00M394.50M33.00M96.80M131.80M
Operating Cash Flow848.30M859.50M835.60M207.70M306.50M306.20M
Investing Cash Flow-338.60M-389.90M-451.80M-180.70M-228.80M-171.30M
Financing Cash Flow-469.70M-491.60M-237.90M-111.90M-50.40M-249.10M

Drax Group plc Technical Analysis

Technical Analysis Sentiment
Positive
Last Price676.00
Price Trends
50DMA
681.04
Negative
100DMA
666.28
Positive
200DMA
630.75
Positive
Market Momentum
MACD
-0.48
Negative
RSI
51.36
Neutral
STOCH
73.18
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:DRX, the sentiment is Positive. The current price of 676 is above the 20-day moving average (MA) of 668.40, below the 50-day MA of 681.04, and above the 200-day MA of 630.75, indicating a neutral trend. The MACD of -0.48 indicates Negative momentum. The RSI at 51.36 is Neutral, neither overbought nor oversold. The STOCH value of 73.18 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:DRX.

Drax Group plc Peers Comparison

Overall Rating
UnderperformOutperform
Sector (66)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
75
Outperform
£2.37B6.1719.64%3.26%-19.04%-34.52%
72
Outperform
51.55B16.857.68%4.53%-7.42%5.84%
69
Neutral
18.33B15.419.86%3.85%-3.11%-31.10%
60
Neutral
7.70B33.4012.95%4.80%3.78%50.18%
58
Neutral
2.20B-32.58-4.00%7.39%15.42%-406.43%
52
Neutral
7.91B-33.7230.12%2.89%-4.82%-123.58%
66
Neutral
$17.65B18.105.60%3.62%6.62%11.55%
* Utilities Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
GB:DRX
Drax Group plc
676.00
72.08
11.94%
GB:CNA
Centrica
166.90
53.99
47.82%
GB:PNN
Pennon Group plc
462.00
18.56
4.19%
GB:SVT
Severn Trent
2,535.00
16.06
0.64%
GB:SSE
SSE
1,665.50
-197.61
-10.61%
GB:NG
National Grid
1,031.50
41.58
4.20%

Drax Group plc Corporate Events

Business Operations and StrategyStock Buyback
Drax Group Enhances Shareholder Value with Strategic Buyback
Positive
Sep 10, 2025

Drax Group plc has executed a share buyback program, purchasing 115,923 ordinary shares on the London Stock Exchange as part of its ongoing initiative announced in August 2024. This transaction is part of a broader strategy to manage the company’s share capital and enhance shareholder value, reflecting Drax’s commitment to optimizing its financial structure and maintaining a strong market position.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyStock BuybackRegulatory Filings and Compliance
Drax Group Advances Share Buyback Programme with Recent Share Purchase
Positive
Sep 9, 2025

Drax Group plc has announced a recent transaction as part of its ongoing share buyback programme, purchasing 119,400 ordinary shares on the London Stock Exchange. This move is part of a broader strategy to manage its capital structure, potentially enhancing shareholder value and solidifying its market position. The transaction affects the total number of shares and voting rights, which stakeholders may need to consider for regulatory compliance.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyStock Buyback
Drax Group Executes Share Buyback Program
Positive
Sep 8, 2025

Drax Group plc has executed a share buyback program, purchasing 120,635 of its ordinary shares on the London Stock Exchange. This move is part of a broader strategy announced in August 2024, with the company having acquired over 45 million shares in total for treasury. This action is likely aimed at optimizing the company’s capital structure and potentially enhancing shareholder value.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Stock Buyback
Drax Group Advances Share Buyback Program with Latest Purchase
Positive
Sep 5, 2025

Drax Group plc has announced the purchase of 120,670 of its ordinary shares on the London Stock Exchange as part of its ongoing share buyback program initiated in August 2024. This transaction reflects Drax Group’s commitment to enhancing shareholder value and managing its capital structure, with implications for its market positioning and shareholder interests.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyExecutive/Board Changes
Drax Group’s CCO Sells Shares to Cover Tax Liabilities
Neutral
Sep 4, 2025

Drax Group plc announced the automatic vesting of Long-Term Incentive Plan shares for Paul Sheffield, the Chief Commercial Officer, on 3 September 2025. Sheffield sold a portion of these shares to cover his tax liabilities, retaining a significant number of shares, which underscores the company’s ongoing commitment to aligning executive incentives with shareholder interests.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyStock Buyback
Drax Group Advances Share Buyback Programme with Recent Purchase
Neutral
Sep 4, 2025

Drax Group plc announced a recent transaction involving the purchase of 124,178 of its own ordinary shares as part of its ongoing share buyback programme. This move is part of a larger strategy initiated in August 2024, where Drax has cumulatively purchased over 44 million shares for treasury, potentially impacting shareholder value and market perception.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyExecutive/Board Changes
Drax Group Appoints New CFO and Announces LTIP Awards
Neutral
Sep 3, 2025

Drax Group plc announced the appointment of Frank Lemmink as Chief Financial Officer, effective 1 September 2025, and the subsequent awarding of shares under the Long Term Incentive Plan 2020. These awards, which include both new and replacement awards, are contingent upon meeting certain performance conditions and continued employment, reflecting Drax’s commitment to aligning executive incentives with long-term company performance.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyStock Buyback
Drax Group Executes Share Buyback to Enhance Capital Management
Positive
Sep 3, 2025

Drax Group plc has executed a share buyback transaction, purchasing 121,300 of its ordinary shares on the London Stock Exchange as part of its ongoing buyback programme. This move, part of a larger strategy announced in August 2024, reflects Drax’s efforts to manage its capital structure and return value to shareholders, potentially impacting its market positioning and stakeholder interests.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Business Operations and StrategyStock Buyback
Drax Group Enhances Shareholder Value with Continued Share Buyback
Positive
Sep 2, 2025

Drax Group plc has announced the purchase of 117,758 of its own ordinary shares as part of its ongoing share buyback program initiated in August 2024. This transaction is part of a larger strategy to manage its capital structure and return value to shareholders, with a total of 44,703,355 shares purchased for treasury since the program’s inception. The buyback is expected to impact the company’s share capital and voting rights, potentially influencing shareholder interests and market perception.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Regulatory Filings and Compliance
Drax Group Announces Share Capital and Voting Rights Update
Neutral
Sep 1, 2025

Drax Group plc has announced its total voting rights and share capital as of 31 August 2025. The company has 431,979,129 ordinary shares issued, with 84,556,569 held in treasury, leaving 347,422,560 shares with voting rights. This information is crucial for shareholders to assess their voting rights and any changes in their interests under the FCA’s Disclosure and Transparency Rules.

The most recent analyst rating on (GB:DRX) stock is a Buy with a £729.00 price target. To see the full list of analyst forecasts on Drax Group plc stock, see the GB:DRX Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 11, 2025