CEZ: No excess sales levies, dividend proposal

Announcement date: Tuesday, 14 March 2024 at 7:00 a.m. CET

The results for the first quarter of this year will be higher than last year. One of the reasons for this is the absence of excess sales levies. We expect EBITDA of CZK38.4bn (+18.2% yoy) and net profit of CZK12.1bn (+11.4% yoy). Earnings will continue to be negatively impacted by the special tax on windfall profits, which still applies this year. We expect a dividend proposal at the upper end of the current dividend policy (CZK39-52). We expect CEZ to reiterate its full-year guidance.

We expect the realized power price in 1Q24 to be roughly the same as in the previous year. Total sales should increase by +7.6% yoy to CZK100.5bn. The main difference is in the levies on excess sales (CZK 10bn), which only applied in the first quarter last year. According to our forecasts, EBITDA profit should reach CZK38.4bn, up +18.2% yoy. Net profit will again be impacted by the special windfall profits tax, which will be in effect for 2023-2025. Together with the increase in the standard corporate tax rate from 19% to 21%, we expect the effective tax rate to be around 55%. We estimate net income at CZK12.1bn (+11.4% yoy).

Dividend: We see the reporting of quarterly figures as an opportunity to announce the dividend proposal from last year's results. Please note that the dividend proposal must be on the agenda of the Annual General Meeting. It must be published at least one month before the meeting. The date of this year's AGM has not yet been set. However, it is traditionally held at the end of June (last year on June 26). The dividend policy of 60-80% of net profit suggests a dividend of CZK39-52 per share. We expect the CEZ Board's proposal to be in this range. In our bull-case scenario, like last year, the Ministry of Finance will make a counterproposal to the Board’s proposal and will want to pay out the whole of last year's profit. This would be equivalent to CZK65 per share, i.e. a gross dividend yield of +7.3%.

FY guidance: We assume no change to the 2024 guidance, although our 1Q24 estimates are high at 32.7% and 44.2% of CEZ's full-year EBITDA and net profit targets, respectively. We expect CEZ management to reiterate its guidance of CZK115-120bn for EBITDA and CZK25-30bn for net profit.  The targets could be updated later in the year.

Author: Bohumil Trampota