Unipro - Solid 2021 IFRS Results, Robust 2022 EBITDA guidance

Unipro has reported a solid set of 2021IFRS results, which beat our and the consensus estimates. The bottom line suffered from a sizable impairment at Berezovskaya GRES in 4Q21, though it should not have any impact on 2022 dividends. The company confirmed its dividend plans and provided a R34-36 bln 2022 EBITDA guidance, and we see some upside risk for our and the consensus forecasts. We reiterate our BUY rating on the stock and still see it as an attractive dividend story. > Robust performance in 2021. Unipro reported a 17% y-o-y increase in revenues and a 14% y-o-y uptick in EBITDA, driven by a mix of factors, including higher electricity output (+8%) and heat output (+12%), higher spot electricity prices (+16% and +6% in price zones 1 and 2) and the relaunch of Berezovskaya GRES Unit 3. > Above estimates. EBITDA (R30.1 bln) beat our estimate (R29.0 bln), the consensus (R29.6) and the upper end of Unipro's guidance range (R27-29 bln) by 4%, 2% and 4%, respectively. The beat to our estimate was mainly due to a higher than projected average CSA tariff for Berezovskaya Unit 3 and KOM prices. > Net income dropped 40% y-o-y to R8.2 bln. This was due to an R11.5 bln impairment (R10.5 bln relates to the Berezovskaya GRES). The company blamed a higher WACC (due to higher inflation), which is used to value future cash flows from the power plants. Meanwhile, adjusted net income was up 9% y-o-y to R17.9 and beat our and the consensus estimates.> Capex rose 14% and exceeded our expectations. Capex was R11.2 bln, versus our estimate of R9.9 bln. Still, leveraged FCF beat our forecast (R16.6 bln versus R15.5 bln) thanks to the higher than expected net cash flow from operating activities and lower net interest expenses. > Unipro expects 2022 EBITDA of R34-36 bln. This would be up 13-19% y-o-y, driven by a full year of contribution from Berezovskaya GRES Unit 3 (versus only eight months in 2021) and the launch of the first modernization project under CSA2: Unit 1 of Surgutskaya GRES 2 at the end of March. Our forecast of R34.5 bln is close to the lower end of the guided range. > Capex and dividend plans. The company guides R5-6 bln in maintenance capex (our forecast is R5 bln) and modernization projects capex at the 2021 level (around R4 bln versus our estimate of R3 bln). However, the higher capex should not affect dividends, as Unipro confirmed its plans to pay out R20 bln per annum until 2024 (a dividend yield of about 16% at the current share price). In addition, Unipro indicated that it does not have plans to sell its coal-fired Berezovskaya GRES, as the asset secures a dividend stream for shareholders (about 50% in Unipro's EBITDA). To lower its CO2 intensity, Unipro instead plans to introduce emissions-capturing measures in the medium term.