PGNiG – “Winter Is NOT Comingâ€
Our last recommendation for PGNiG, a ’buy’ issued in April 2019, was a reflection of a firm belief in the temporary nature of the 2018/2019 winter demand slump due to abnormally warm weather, which we were sure would be followed by a strong rebound in the gas market. As things stand, as we approach the mid-point of yet another unseasonably warm winter, it has become increasingly obvious that the EU gas market has shifted to a persistent surplus. As gas prices retreat with no sign of a rebound in the near future, their decoupling from crude oil represents another setback for PGNiG. After updating our market outlook, we are prompted to cut our 2020-2022 earnings forecasts for PGNiG by an average of 18%, and so we downgrade the stock from buy to hold with the target price revised downward to PLN 4.06. Some upside potential in the coming months might come from an arbitration victory v. Gazprom, though the award will not be nearly enough to offset downside risk.
Polskie Gornictwo Naftowe I Gazownictwo SA Polish Oil & Gas Co (PGNiG) is an integrated natural gas company based in Poland. Co.'s core activity covers exploration and production of natural gas and crude oil as well as import, storage, trade and distribution of gas and liquid fuels. Co.'s scope of activity includes gas trading and commercial support, as well as operation, maintenance and expansion of its distribution system. Co.'s distribution networks comprises over 100 thousand kilometers of gas pipelines (high, upper-medium, medium and low pressure), which cover primarily industrialized and urbanized areas of the country.
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.
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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.
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