RAPORT ANALIST February 27, 2017

Growth story fades away on investments under performance.

Valuation We update our view on Transelectrica with a SELL recommendation and a target price of RON 23.8 per share, revealing a downside potential of 18% against current levels. We cut our NEUTRAL recommendation to SELL and reduced our previous target price (RON 28.1/share) mainly on a higher-than-expected cut in Y3 transmission tariff (11% vs. 4% our estimate) and reduced level of commissioned investments over the 3rd regulatory period that would be reflected in a correction of revenues over the next period. We used a DCF model with a 5-year explicitly forecasted period after which a terminal free cash flow with a perpetual growth of 1% is employed.