WOOD Flash – CEZ: 4Q17 results beat consensus, FY18E guidance range rather weak

Despite the solid 4Q17 numbers, we expect neutral or weaker trading this morning (20 March) on the back of the FY18E guidance, which is below the current Bloomberg consensus range and our own marked-to-market forecasts. Despite the clear downward trend in power prices (down c.10% yoy on c.20% lower coal prices), the stock has been supported by the idea of splitting the company and by a solid current yield – assuming a 90% payout, a DPS of CZK 35, or a 6.9% yield. However, with yield support falling next year to 3.5-4.1%, on management’s guidance range, we see little impulse for the stock to gain until (and unless) the issues with splitting the company/funding new nuclear take a more tangible form (likely only once a new coalition government has been formed and ministers from all parties stake out their positions, in our view). Trading at guided 2018E EBITDAs of 7.5-7.8x, the stock is at a small 3% discount vs. its peers (in line with the trailing 3Y average) but, with a below-average prospective yield (just under c.4% vs. 4.6% for its peers), we remain HOLDers of the stock.