Industrial output surprised significantly to the upside in September. The strong result was driven primarily by a rebound in automotive production following the summer shutdowns and higher energy output. New industrial orders also sent a positive signal, rising by 8% yoy, mainly on the back of stronger foreign demand. In our view, these developments confirm the ongoing cyclical recovery in Czech industry. However, higher energy prices, supply chain issues and tighter financial conditions may limit the pace of the recovery. The foreign trade balance recorded a surplus of CZK23.7bn in September, although this was lower than a year earlier. Construction output remained flat mom and rose by 1.6% yoy, with stronger civil engineering offsetting a decline in building construction.

Industrial output surprised significantly to the upside in September. The strong result was driven primarily by a rebound in automotive production following the summer shutdowns and higher energy output. New industrial orders also sent a positive signal, rising by 8% yoy, mainly on the back of stronger foreign demand. In our view, these developments confirm the ongoing cyclical recovery in Czech industry. However, higher energy prices, supply chain issues and tighter financial conditions may limit the pace of the recovery. The foreign trade balance recorded a surplus of CZK23.7bn in September, although this was lower than a year earlier. Construction output remained flat mom and rose by 1.6% yoy, with stronger civil engineering offsetting a decline in building construction.

Industrial output surged at the end of 3Q, delivering a significant positive surprise. It rose by 2.7% mom in September, the strongest monthly increase since December 2023. In yoy terms, industrial output was up by 3% (NSA), significantly above both the market consensus and our more pessimistic forecast. Adjusted for the differing number of working days, output rose by 6.2% yoy, the strongest increase since September 2022. Thanks to the sharp September increase, industrial output in 3Q was 0.7% higher qoq (vs 1.9% in 2Q) and may thus have contributed to the stronger performance of the Czech economy, which grew by 0.5% qoq in the third quarter.

Manufacturing output rose by 2.4% mom. This was significantly supported by a rebound in automotive production following the summer shutdowns associated with capacity expansion. However, the additional capacity is not being fully utilised due to supply chain issues. Car production rose by 13.3% mom in September, although this was partly offset by a 34% decline in the production of other transport equipment, correcting the sharp increase in August associated with the completion of a major rail vehicle order. Strong growth was also recorded in other sectors. Output increased sharply in the manufacture of rubber and plastic products (+2.5% mom), electrical equipment (+2.2%), chemicals and chemical products (+3.1%) and basic metals (+5.7%). A 5.1% mom increase in energy output also contributed significantly to the rise in total industrial production in September, reflecting the greater availability of nuclear generation capacity following the summer shutdowns. Energy output was up by almost 21% yoy.

New industrial orders also showed a positive trend, rising by 11.1% mom in September and by 8% yoy. Both domestic and foreign orders increased on a mom basis. However, the yoy increase was driven by higher foreign orders, which are currently showing a stronger growth trend than domestic orders. This is likely related to the gradual recovery in European industry, particularly in Germany, which is benefiting, among other things, from fiscal stimulus.

Czech industrial performance in 3Q came as a positive surprise. However, leading sentiment indicators are sending mixed signals. While industrial confidence according to the CZSO business survey has deteriorated in recent months and fell to its lowest level since April 2025 in October, the manufacturing PMI rose to 55 pts in October, its highest level since February 2022. Solid growth in domestic industrial output in 3Q and the increase in orders have so far been more consistent with the favourable PMI reading, which, in our view, confirms the cyclical recovery in Czech industry, supported by rising foreign demand. However, domestic industry continues to face higher energy prices, supply chain issues and tighter financial conditions. These factors may limit the extent of the cyclical recovery.

Foreign trade recorded a surplus in September

The foreign trade balance recorded a surplus of CZK23.7bn in September, CZK3.3bn smaller than a year earlier. The conflict in the Middle East had a negative impact on the balance, widening the deficit in oil and natural gas by CZK6.5bn and the deficit in coke and refined petroleum products by CZK3.1bn. The balance in computers, electronic and optical equipment also deteriorated by CZK3.3bn. Conversely, the balance was supported by higher surpluses in electricity (CZK4.8bn), fabricated metal products (CZK4.0bn) and other transport equipment, including aircraft and rail vehicles (CZK3.5bn). Exports rose by 7.8% yoy and imports by 9.2%. In seasonally adjusted terms, exports increased by 1.5% mom and imports by 1.1%.

While last year’s foreign trade surplus reached CZK200bn, we expect this year’s figure to be roughly half that amount. The lower surplus will reflect higher prices of imported mineral commodities as well as a recovery in domestic investment activity, which is import-intensive.

September construction output did not disappoint

September was particularly strong for civil engineering, which we estimate rose by 3% mom after seasonal adjustment. By contrast, building construction fell by 1.5% compared with August. As a result, total construction output was flat mom in September, but 1.6% higher than a year earlier. Civil engineering also performed strongly in yoy terms (+2.9%), while building construction lagged slightly behind (+0.8%).

Growth in civil engineering has been driven primarily by public infrastructure projects, which remain relatively volatile in the monthly data. However, their performance over the first three quarters of the year has been rather disappointing, with output down by an average of 2.4% yoy. By contrast, building construction was 5.3% higher yoy over the first nine months of the year. However, activity has shown signs of weakening since the spring, which may be related to both greater overall economic uncertainty and higher financing costs.

September data from the residential sector were weaker. The number of building permits issued was unchanged yoy, mainly due to a lower number of permits for reconstruction. Housing starts fell by 1.2% yoy, while the number of completed dwellings was 1.0% lower than in September last year.

Following last year’s construction boom, activity is normalising this year. While construction output grew by 10.7% in real terms in 2025, we expect growth to slow to 2.5% this year before edging up to 2.7% next year. Employment in the sector continues to rise and was on average 2.1% higher yoy in the first nine months of the year, while average wages increased by 4.9%.

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%.