Nuclearelectrica: Six years lucky (HOLD – transfer of coverage)

Nuclearelectrica has rallied in the past two months, and was among the top performers on the local exchange in the past 12 months, rising by 58%, while the BET climbed by a meagre 2%. The rally was supported by improving profitability and the generous dividends expected. The company benefits from a favourable context both locally, with the liberalisation of the power market, and internationally, via the increase in power prices, and we expect the dividend yield to increase from 8.4% this year to 9.7% in 2022E, and to stay around 10% over 2023-26E. On our estimates, these six years of joy should be followed by possibly moderate dividends in 2027E and then two years of zero dividends, as unit 1 needs to close for refurbishment. Going forward, the profit is likely to be dragged lower by higher depreciation and interest expenses, triggered by the refurbishment. We see Nuclearelectrica as fairly valued now. We transfer coverage and rate it a HOLD, and we set a new price target (PT) of RON 24.4/share, implying upside of 7%.