Conpet: Profit boost from the rise in tariffs (upgraded to HOLD)

We have updated our estimates, following the approval of the 2022E tariffs, which have been raised, on average, by more than 10% yoy. The 15% tariff increase for the domestic subsystem was based on conservative assumptions regarding the volumes to be transported in 2022E, which we do not see as materialising. We see mild pressure on the costs side in 2022E, with energy costs accounting for just 5% of total expenses and railway costs locked by contracts until 2023E. Thus, for 2022E, we forecast an increase of 18% yoy in net profit, triggered by the lift in tariffs. However, we treat this as a one-off, and we expect that the volumes used to set the 2023E tariffs could be, once again, closer to the volumes effectively transported, with the 2023E net profit moving nearer to the regulated level embedded in the tariffs, which we believe to be close to RON 50m. While, for 2022E, our net profit forecast stands at RON 62.6m, 13% above our previous estimate (July 2021), over 2023-29E, we expect the net profit to settle around RON 52-54m, only 2% higher than our previous figures, on average. We expect an average dividend yield of 7.9% p.a. for 2021-25E, with the investments targeted by the company generating additional yield potentially in the longer run. We have upgraded our recommendation to HOLD and set our new 12M price target (PT) at RON 83.8, implying 7.2% upside.