CEZ – Undervalued and Overdue For a Catch-Up Rally
The European utilities sector has rallied over 50% since the beginning of 2019, but the return on CEZ in the period has been next to nothing. Compared to an average 12M forward EV/EBITDA ratio of 8.7x, up from 7.2x last January, at the current level the Czech utility is trading at a discount of 20%. There is no question that CEZ still has further to go in terms of ESG, but its strengths include a low-carbon fleet (with the earnings potential positively correlated with prices of emission allowances), a firm plan to phase out coal, and EBITDA which is more than 50% comprised of environmentally safe/clean businesses. Dividends are another of CEZ's strong suits, with stable yields well above Stoxx Utilities averages and the risk-free rate. Last but not least, it is worth pointing our CEZ's growing involvement in renewables, supported by the Czech government's Modernization Fund vehicle. We maintain a buy rating for CEZ, with the target price trimmed to CZK 592.91 to reflect reduced expectations as to future power and energy prices, combined adjustments for higher peer multiples.
CEZ Group is a dynamic, integrated electricity conglomerate based in the Czech Republic and with operations in a number of countries of Central and Southeastern Europe and Turkey. Co. is an international group consisting of nearly 120 companies, Czech and foreign. Co.'s primary activities involve the production and transmission of electricity through nuclear, coal-fired and hydro power stations; production and distribution of heat and processing of secondary products generated during the production of electricity and heat as well as coal mining. Co. has operating companies in Poland, Bulgaria, Romania, the Netherlands, Ireland, Germany, Hungary, Albania, Turkey, Serbia, and Slovakia.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
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