J&T Banka Czech Morning Note: 04/07/18; CEZ, Unipetrol, EP Energy
Index PX: 1,076 points (up 0.5% d/d); volume: CZK 455m (USD 20m)
The Prague Stock Exchange will be closed on Thursday and Friday (July 5 and 6). Trading resumes on Monday July 9.
Prague grew for the second day in a row yesterday, and it followed global equity markets. The increasing electricity price helps CEZ (+1.20%). As on Monday, Komercni banka (+0.85%) and Moneta (+1.03%) grew yesterday, and Austrian insurance company VIG (+0.83%) increased too. The only Erste Group (-0.65%) declined and went against the financial sector in Europe.
CEZ: Neutral. LT: Buy. Target price: CZK 568
According to a member of the Board of Directors and the Chief Conventionals Officer Ladislav Stepanek, coal-fired power plants should be operated by around 2050. It will depend on the environmental policy of the European Union, but the closure of coal power plants, Stepanek can not imagine in the near future . The reason is to secure the electricity supply. According to Stepank, the construction of new coal-fired power plants is not considered, and gas power plants are not paid in current market environment. In order to meet ecological limits, CEZ will invest CZK 10bn in coal-fired power plants in the coming years. Please note that CEZ plans to spend more than CZK 10bn a year on generation-traditional energy, where coal-fired power plants belong. There is no surprising information in the interview.
Unipetrol: Neutral. LT: Not rated. Target price: Not rated
Unipetrol reported a decline in model margins in 2Q18. The combined petrochemical margin (EUR 658/t, -9.1% q/q and -21.9% y/y) declined both in quarter-on-quarter and year-on-year comparison. A decline in the refining margin (USD 2.5/b, -3.8% q/q and -34.2% y/y) from high values a year ago is as expected. Together with the B-U differential, it is weaker by 13% y/y. Despite the decline, the reported margins are still at solid levels. Unipetrol is set to report earnings results for 2Q18 on July 20, 2018.
Please note that PKN Orlen, which owns approx. 94% of Unipetrol’s shares, will buy out minority shareholders at CZK 380/share by the end of the year and delist Unipetrol from the stock market. The market price of Unipetrol’s shares should be close to the level of the buyout price.
EP Energy: Positive
Fitch rating agency raised rating of EP Energy to BBB-, which is investment grade, with stable outlook. According to the agency, it reflects an increase of the rating of the parent company EP Energy EP Infrastructure.
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