Czech inflation declined from 2.5% yoy in September to 2.4% yoy in October. This was slightly below the market consensus of 2.5% yoy. However, it was 0.1pp higher than both our estimate and the CNB’s forecast.

Czech inflation declined from 2.5% yoy in September to 2.4% yoy in October. This was slightly below the market consensus of 2.5% yoy. However, it was 0.1pp higher than both our estimate and the CNB’s forecast.

The main reason for headline inflation being slightly higher than our forecast was the increase in food prices. In October, prices for food and non-alcoholic beverages, as well as alcohol and tobacco, all rose by 0.6% mom. We had forecast a more modest increase of 0.2% mom for the entire food category, including all beverages and tobacco. This stronger price growth may indicate the gradual impact of higher fuel costs and a weaker agricultural harvest this year due to high temperatures and severe drought conditions. Agricultural and food producer prices had already risen in September. Despite the slight mom increase, however, food and non-alcoholic beverages were still 4% cheaper yoy.

Fuel prices fell slightly, while household energy prices remained stable. On average, fuel prices were 1.5% lower mom in October, supported by a renewed reduction in excise duty on diesel. According to the Czech Statistical Office, this government measure reduced inflation by 0.09pp. However, compared with last year, fuel was still around a third more expensive. Household electricity and heating prices remained unchanged in October, while gas prices fell slightly by 0.1% mom. Household energy costs have therefore not yet been affected by the significant rise in wholesale electricity and gas prices. Regulated prices increased by 0.1% mom in October and were 0.8% lower than a year ago. This is supported by the fact that many households are on fixed-price energy contracts. This should continue to limit the impact of the energy price shock on consumer prices, even though energy suppliers have already begun to increase their prices gradually.

Core inflation remained unchanged at 3.1% yoy in October, staying slightly above the upper limit of the CNB’s tolerance band. While this was in line with our estimate, the CNB had forecast a higher figure of 3.2% yoy in October. We estimate that the seasonally adjusted month-on-month growth of core prices also remained essentially unchanged from September, standing at just under 0.3% in October. The three-month moving average then fell slightly in annualised terms, from 3.3% in September to 3.2% in October. Services inflation slowed from 4.6% to 4.5% yoy. Growth in imputed rents eased for a third consecutive month, falling from 5.1% yoy in September to 4.6% yoy in October. In addition to the weakening momentum in house prices, a higher comparison base also played a role. Conversely, paid rent growth accelerated from 6.1% to 6.4% yoy. Although core inflation remained unchanged, we estimate that it rose from 2.2% yoy in September to 2.4% yoy in October, excluding both rent components. We expect growth in core goods to gradually strengthen due to higher production and transport costs. The shortage of electronic components caused by the AI boom may also have an impact, as evidenced by September’s CPI data, which showed a significant rise in the prices of mobile phones, computers, laptops and tablets. Prices in the domestic manufacturing sector were 5.3% higher yoy in September.

The decline in annual inflation in October was probably only temporary, as we expect price growth to accelerate again in the coming months. The October fall in inflation was largely due to a higher comparison base for food prices. Last October, food prices (including all beverages and tobacco) showed an even stronger growth of 1.1% mom, although this was offset the following month by a decline of 0.9% mom.

Further rises in inflation are set to be driven by higher food, energy and fuel prices. According to our forecast, the spillover effects of the conflict in the Middle East and lower agricultural yields will gradually push up annual inflation. We expect inflation to peak at just under 4% yoy in February, before falling again. We estimate inflation to average 2.1% this year and rise to 3.0% next year.

CEZ's net profit for 3Q26 is expected to increase by +42% yoy, reaching CZK7.8bn. This strong growth is due to a base effect, given that the special tax (WFT) is not payable this year. However, EBITDA will fall by 9.6% yoy to CZK26.5bn. The main reason for this is lower electricity prices. We also anticipate that CEZ's full-year projection will be revised upwards, primarily due to the sale of a 49% stake in JESS.

Announcement date: Thursday, November 12, 2026, at 7:00 a.m. CET

CEZ's net profit for 3Q26 is expected to increase by +42% yoy, reaching CZK7.8bn. This strong growth is due to a base effect, given that the special tax (WFT) is not payable this year. However, EBITDA will fall by 9.6% yoy to CZK26.5bn. The main reason for this is lower electricity prices. We also anticipate that CEZ's full-year projection will be revised upwards, primarily due to the sale of a 49% stake in JESS. 

Revenues in the Generation sector are set to fall yoy due to a drop in electricity prices. While CEZ sold electricity at an average price of EUR124MWh in 2025, the price this year could be as low as EUR110MWh. However, we anticipate growth in the Distribution sector, as well as modest growth in the Sales sector. According to our model, total revenue for 3Q26 will reach CZK76.5bn (+5.0% yoy). EBITDA is expected to decline by 9.6% yoy to CZK26.5bn. The Generation segment will account for more than half of EBITDA. Distribution will contribute approx. 35%. We estimate net profit for 3Q26 to be CZK7.8bn. This will represent yoy growth of +42%. This is in contrast to the decline in EBITDA and is due to a significantly lower tax burden. The effective tax rate will fall from 56.4% (3Q25) to the standard level. This is because the WFT payable in previous years has ended.

2026 Guidance: CEZ is reviewing its full-year forecasts on a quarterly basis. We expect that the update to the FY targets will include, in addition to the traditional indicators, the sale of JESS (approx. CZK2.4bn) from early October. We anticipate that at least the current net profit forecast will be raised. The targets updated after 2Q26 are EBITDA of CZK109–114bn and net profit of CZK31–35bn.

Our estimates of YTD results correspond to 77% of the EBITDA forecast and 78% of net profit.

The outlook for net profit in the next quarter (4Q26) is very strong. This will include the sale of the stake in JESS, among other things. Net profit is expected to rise to CZK38bn for FY 2026. Assuming an 80% payout ratio, this suggests a dividend of CZK56 per share. The gross yield would then be +4.1%.