Correction: Romgaz - Profit is under pressure from rising production taxes - Earnings Review from Concorde Securities Ltd. (Hungary)

In all, we cut our estimate for Romgaz’s clean EBITDA from RON 2.5 bn for 2018-2019 to RON 2.3-2.4 bln on higher-than-expected taxes and lower regulated storage tariffs, weak power generation, as well as the changing accounting policy regarding exploration expenses.

We trim our net income estimates for 2018 and 2019 as well from RON 1.57 bln and RON 1.53 bln to RON 1.42 bln and RON 1.43 bln, respectively. Notwithstanding lower earnings forecasts, we remain confident that Romgaz will stick to a pay-out ratio of at least 90% of its annual reported net income in the coming years, hence our expectation for a DPS growth remaining in line with its reported EPS growth trajectory. We forecast DPS to be RON 3.31 for 2018 and RON 3.35 for 2019. If our EPS and DPS expectations materialize for 2018 and 2019, Romgaz’s share price implies a DIVY of 9.2% for the coming years.