Origin Energy's Three-Part Investment Case Survives a Softer Profit Year

Strong electricity margins, an APLNG stake and its Octopus Energy holding are giving fund managers more ways to like Origin than the headline profit suggests.

2 Sep 2026 · 3 min read

Origin Energy delivered an FY26 result that beat already-lowered expectations, and fund managers are increasingly framing the stock around three distinct value pillars rather than a single earnings number, even as pressure on its core domestic electricity earnings is expected to build again from FY28.

A result that beat lowered expectations

Pendal Group described FY26 as coming in slightly ahead of expectations, with Energy Markets division EBITDA guidance flat year on year, itself 7 percent above what the market had forecast, as the underlying decline the market anticipated in that division played out more slowly than expected. Pendal noted Octopus Energy continues to grow customer numbers impressively, with its Kraken software platform adding more customers, and that Origin has stopped giving explicit financial guidance for that business, even as more pressure is expected to build in FY28. Plato Investment Management, holding an overweight position, pointed out profit was 22 percent lower than the prior year, yet the result still came in 5 percent above expectations because the market had already been forecasting a decline, with strong cash flow of more than $2 billion allowing the company to hold its dividend flat, equating to a 7.2 percent annual gross yield, while government subsidies for household batteries are easing pressure during the evening peak periods that had previously been a problem.

Electricity margins are running well above target

First Samuel said the more important story sat beneath the headline profit number, in domestic electricity gross profit of $45.20 per megawatt hour, up from $40.70 and well above Origin's own medium-term target range of $25 to $40. Origin expects that margin to stay above its medium-term range as a growing contribution from its battery portfolio offsets lower wholesale prices, with Energy Markets EBITDA guidance of $1.55 billion to $1.85 billion carrying a midpoint roughly equal to the strong FY26 result itself.

The most important number in the domestic result was electricity gross profit of $45.20 per megawatt hour, up from $40.70, and well above Origin's medium-term target range of $25 to $40.

— First Samuel, Article, August 2026

A three-part investment case

Yarra Capital Management named Origin a preferred large-cap pick, noting FY26 EBITDA came in 3 percent ahead of expectations with the stock up around 9 percent, and laid out a three-part thesis behind its continued conviction: a resilient core energy markets business, worth around 60 percent of its valuation, where battery and retail growth can offset weak wholesale prices; its stake in the APLNG joint venture, worth around 25 percent of value, offering both production expansion and debt-refinancing upside; and its holding in Octopus Energy and Kraken, worth around 15 percent of value, as a monetisation opportunity in its own right.

Thesis rests on three parts, a resilient core energy-markets business where battery and retail growth can offset wholesale-price weakness, its APLNG stake offering production-expansion and refinancing upside, and its Octopus Energy and Kraken stake.

— Yarra Capital Management, Presentation, August 2026

Yarra sees scope for Origin to lift its dividend over time from a currently around 5 percent fully franked yield, supported by a healthy balance sheet, controlled capital expenditure, strong LNG prices and surplus franking credits. What fund managers are watching next is whether Octopus Energy and Kraken's customer growth eventually converts into a clearer monetisation event, whether electricity gross profit can stay above the top of its medium-term target range as the battery portfolio scales, progress on APLNG expansion and refinancing, and whether the FY28 pressure flagged on Energy Markets proves as manageable as FY26's slower-than-expected decline suggested.