RAPORT ANALIST November 16, 2016

9M results are fine but Q3 wasn’t great

Electrica reported its Q3 results yesterday after market. Generally, 9M results are increasing despite the poor Q3 earnings.
Cumulated earnings increased in the first nine months by 9.7% y-o-y in case of EBITDA and 12% in case of the EBIT. Net profit of the group is around RON 357 million, or RON 1.03 per share. We see the RON 400 million after minority profit reachable thus the current DPS level is sustainable and might increase further.
Furthermore, we assume that the company should pay out special dividend to the shareholders to reduce the cash level in the company, which is around RON 8 per share.
The positive impact in the first 9M was mainly due to the reversal of the provision related to the compensatory indemnities in respect of Electrica Serv restructuring programme.
In this quarter supply revenue decreased by 8.1% y-o-y, while the distribution revenue fell by 2.4%. EBITDA of the supply segment reached RON 30 million vs. RON 12 million in the past year, however distribution EBITDA decreased by 9.8% y-o-y to RON 240 million due to the negative price effect generated by the lower regulated distribution tariffs partly compensated by a positive volume effect.
Net profit after minority was at RON 99 million down by 14% y-o-y in Q3.
We hope Electrica and Fondul will reopen the negotiations after the election in December. In the current regulatory environment we see the transaction the main growth potential for Electrica. We maintain our target price and recommendation.
Electrica will hold conference call on the 21th of November at 15:00 CET time.