Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2033 bonds, CZK4.0bn of 2036 bonds and CZK2.0bn of 2038 floaters. The August issuance calendar indicates CZK20.0bn to be sold, the lowest indication since March. Overall, MinFin has issued CZK214.9bn in primary auctions, as well as an additional CZK10.4bn and EUR250m on secondary market taps thus far this year. It has also returned to the secondary market in the summer, conducting switch operations totalling CZK17.9bn. Overall, we believe the issuance pace is unlikely to slow in the rest of 2025.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK4.0bn of 2033 bonds, CZK4.0bn of 2036 bonds and CZK2.0bn of 2038 floaters. The August issuance calendar indicates CZK20.0bn to be sold, the lowest indication since March. Overall, MinFin has issued CZK214.9bn in primary auctions, as well as an additional CZK10.4bn and EUR250m on secondary market taps thus far this year. It has also returned to the secondary market in the summer, conducting switch operations totalling CZK17.9bn. Overall, we believe the issuance pace is unlikely to slow in the rest of 2025.

Market situation: At last Thursday’s meeting, the CNB left rates unchanged, with the governor’s traditionally hawkish rhetoric underpinned by a relatively optimistic new staff forecast (full report: https://bit.ly/CNB_Aug25_EN). Both the July headline and core inflation were 2.7% yoy (full report: https://bit.ly/CPI_Jul25_EN), which was 0.1pp lower than what the CNB expected. GDP growth in the second quarter of 2025 was also lower at 0.2% qoq versus the CNB’s forecast of 0.5% qoq. The CZK IRS’s reaction to the meeting was relatively mild as the outcome was widely expected. CZGB yields were under a bit of pressure, cheapening by up to 8bp on the long end of the curve week-on-week in ASW terms.

Rates outlook: We expect headline inflation to gradually settle close to the central bank’s 2% target in 2H25 and remain there in 2026. This positive outlook amid expected economic slowdown due to tariffs, as well as the impact of restrictive monetary conditions, are likely to lead to further CNB rate cuts to the 3% terminal rate. This level could, however, be reached only in 1H26. See our forecast in the Czech Economic Outlook: https://bit.ly/CEO_3Q25_EN.

CEZ reported an increase in EBITDA of +7.2% yoy to CZK30.9bn for 2Q25, surpassing market expectations by +2.1%. This growth was driven by the Distribution and Sales segment. Net profit declined by 47% yoy to CZK4.0bn due to an increase in D&A. The extremely high effective tax rate caused the net profit to be 27% below consensus. However, due to lower operating and commodity costs and higher realized electricity prices, CEZ raised its full-year guidance for both EBITDA and the bottom line. We consider the reported figures to be strong and expect market consensus to increase.

CEZ reported an increase in EBITDA of +7.2% yoy to CZK30.9bn for 2Q25, surpassing market expectations by +2.1%. This growth was driven by the Distribution and Sales segment. Net profit declined by 47% yoy to CZK4.0bn due to an increase in D&A. The extremely high effective tax rate caused the net profit to be 27% below consensus. However, due to lower operating and commodity costs and higher realized electricity prices, CEZ raised its full-year guidance for both EBITDA and the bottom line. We consider the reported figures to be strong and expect market consensus to increase.

Revenues for 2Q25 reached CZK74.2bn, remaining almost unchanged yoy (-0.2% yoy). EBITDA increased by +7.2% yoy, reaching CZK30.9bn. The margin increased by 2.9pps to 41.7% due to lower commodity costs. The production segment decreased by 14% yoy due to trading, which experienced a temporary revaluation of derivatives and lower realized electricity prices. This quarter's results were driven by the Distribution and Sales segment. Distribution grew by 73% yoy following the consolidation of the acquired GasNet, boosted by growth in both gas and electricity volumes due to colder weather. Sales increased by 141% yoy due to lower commodity prices and higher sales resulting from colder weather. Adjusted net profit was CZK4.0bn, marking a 47% yoy decline. Net profit was primarily impacted by the substantial effective tax rate, which reached 74% in the 2Q25. This is the main reason why net profit is below market estimates (-27%). Net profit is also lower yoy due to increased D&A from the integration of GasNet into the consolidation group, as well as higher depreciation of coal-fired power plants.

Leverage (net debt to EBITDA) remained at 1.3x, unchanged from the first quarter. This is down from 1.5x at the end of 2024.

2025 Guidance: CEZ management has increased its full-year EBITDA and net profit projections. EBITDA is now expected to reach CZK132-137bn (previously CZK127-132bn), and net profit is expected to reach CZK26-30bn (previously CZK25-29bn). These figures represent increases of +3.9% and +3.7% for EBITDA and net profit, respectively. The new net profit target indicates a dividend of up to CZK 44.50 (an 80% payout and the upper end of the full-year target), corresponding to a gross yield of 3.6%.