11:55 AM EST, 12/05/2024 (MT Newswires) -- TotalEnergies (TTE) has underperformed its peers by more than 15% since late summer due to political uncertainty in France, scrutiny over its investment in Adani Group, weaker results, and lowered expectations for liquefied natural gas earnings, RBC Capital Markets said in a note on Thursday.

"With TotalEnergies now trading at a modest premium, which is set to contract over time, we see an opportunity for long-term investors to build a position, ahead of the growth to come," the firm added.

RBC said that although 2025 may appear lackluster for the energy sector due to moderating oil prices and weak refining margins, TotalEnergies is positioned for medium-term growth in free cash flow due to its investment strategy.

While some of the company's projects, such as US offshore wind initiatives, are on pause due to political developments and scrutiny over investments in Adani, TotalEnergies' ability to secure premium power purchase agreements reflects a competitive advantage, the firm said.

TotalEnergies' investments in Adani, including Adani Green Energy and various joint ventures, have come under scrutiny following an SEC probe into Adani executives over potential bribery. This raises concerns about TotalEnergies' due diligence and has likely contributed to its recent underperformance relative to peers, according to the note.

The company's projected 2025 free cash flow yield might trail peers, primarily due to higher growth investments expected to pay off in the coming years. RBC highlights the company's strong free cash flow per share growth potential and forecasts a sector-leading total shareholder return next year, mitigating execution risks.

RBC upgraded its rating on the company's stock to outperform from sector perform with a price target of 80 euros ($84.56).

Price: 57.15, Change: +0.45, Percent Change: +0.80