CEZ analysis (Hold, CZK 448)

Dear clients

 

Please find attached our update of CEZ analysis.

 

We see an increasing risk that 2016 guidance won’t be achieved. Even if it is, profits will be rather small in the second half of the year due to several one-off factors. On the other hand, CEZ shares should still offer a very attractive dividend yield, and future dividends could significantly surprise on the upside. However, we don’t expect the dividend from this year’s profit to be declared earlier than in spring 2017. In the absence of short-term positive catalysts and with the shares slightly overvalued based on the expected EV/EBITDA multiple, we downgrade our recommendation from Buy to Hold.

 

We slightly increased our DCF-based target price from CZK 420 to CZK 448 per share. This was caused mostly by lower required rates of return than in our February analysis, which outweighed the short-term deterioration of financial results caused by production problems.

Autor: Josef Němý