CEZ: How I Learned to Stop Worrying and Love the Bomb (upgraded to BUY)
We have updated our earnings estimates for CEZ, with a new 12M price target (PT) of CZK 557/share (upside of 25%), and we upgrade our recommendation on the stock to BUY, from Hold. We maintain that, despite the generally supportive power macro environment, the stock has moved into the periphery of many investors’ screens because of the new nuclear story. Also, while it has been decided that CEZ will move onto the first phase of the project – tendering for a technology supplier – what has changed is that we have a much clearer idea of the principles and safeguards that CEZ and the state have, and will, be putting in place to protect the company’s interests. With this in mind, it is time, in our view, for the market to stop worrying and love – or, at least, fear less – the bomb, because, as the safeguards become better understood and the details around the project accrue, the significant c.20% discounts vs. its peers should start to narrow, in our view.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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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