Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2034 bonds and CZK4.0bn of 2037 bonds. So far this year, MinFin has issued a total of CZK232bn CZGBs on the primary market (MinFin projects CZK270–370bn for the full year), as well as an additional CZK121.8bn on the secondary market. Last week, the Ministry of Finance submitted a draft state budget for 2027 with a deficit of CZK389bn (compared to CZK310bn this year).  We estimate that this would lead to a widening of the total public finance deficit from 2.8% of GDP this year to 3.5% of GDP in 2027, intensifying the overall expansionary stance of the fiscal policy.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2034 bonds and CZK4.0bn of 2037 bonds. So far this year, MinFin has issued a total of CZK232bn CZGBs on the primary market (MinFin projects CZK270–370bn for the full year), as well as an additional CZK121.8bn on the secondary market. Last week, the Ministry of Finance submitted a draft state budget for 2027 with a deficit of CZK389bn (compared to CZK310bn this year).  We estimate that this would lead to a widening of the total public finance deficit from 2.8% of GDP this year to 3.5% of GDP in 2027, intensifying the overall expansionary stance of the fiscal policy.

Market situation: CZGBs yields remain elevated with the 10-year yield at 5.1%. On the Czech data front, nominal wage growth reached 6.4% yoy in 2Q26, while the data for 1Q26 was substantially revised from an original 8.1% to 6.1% yoy, reducing the overall pro-inflationary risk stemming from the labour market (more here: https://bit.ly/Wages_2Q26_EN). Czech flash August CPI inflation came in at 1.9% yoy, in line with the consensus and CNB forecast. We expect headline inflation to continue its upward trend in the coming months, peaking above 3% yoy in February 2027. The CNB‘s quiet period prior to the monetary meeting next week starts on Thursday. No rate change is expected at the meeting.

Rates outlook: Our baseline scenario still anticipates that the CNB repo rate will remain at its current level for an extended period. However, energy-related risks and a public finance deficit of 3.5% of GDP next year (compared to the CNB’s August forecast of 2.9%) are skewing the risk of the CNB tightening its monetary policy further. In any case, the market pricing in an additional three hikes seems excessive to us.

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

Revenue for the second quarter totaled CZK74.7bn. This represents a slight yoy increase of +0.8%. However, EBITDA fell by 23% yoy to CZK23.8bn. This is 8.7% below the consensus estimate. As expected, the decline in EBITDA was negatively impacted by lower electricity prices, which affected the Generation segment. This sector also recorded a loss from Trading where positions were revalued. However, Mining and Distribution both saw yoy growth. Net profit, adjusted for exceptional items and non-controlling interests, increased by +8% yoy to CZK4.3bn. As anticipated, this growth was driven by a substantial decrease in the effective tax rate, due to the absence of a special tax (WFT).

The leverage ratio, measured as net debt to EBITDA, remained unchanged at 1.6x on a quarterly basis. However, both debt and cash increased due to the dividend payment in August.

Guidance for 2026: CEZ has once again increased its targets for this year. This is based on higher electricity prices, which are set to rise to EUR106–110MWh (previously EUR104–108MWh), higher output from nuclear power stations, and higher profits in the Distribution sector. According to the new forecast, EBITDA is expected to reach CZK109–114bn (+1.8% compared to the previous forecast of CZK107–112bn), while net profit is expected to reach CZK31–35bn (+3.1% compared to the previous forecast of CZK30–34bn).

According to our model, EBITDA should total CZK112.5bn, while net profit should total CZK37.4bn. The market is expecting CZK112.6bn and CZK36.8bn respectively.

The results reported for 1H26 represent 53% of CEZ’s revised full-year target for EBITDA and 54% for net profit (mid-range).

Compared with previous expectations, the estimated output from the gas-fired power station and the nuclear units has increased. Conversely, the outlook for renewable energy sources has been revised downwards.