Electricity Generation and Distribution
With CentrEnergo’s tiny net profit of UAH 35mn (USD 4.4mn) for FY11 already priced in by the market, traders’ focus has shifted to the company’s FY11 sales and EBITDA, which were unveiled at last Friday’s shareholder meeting. Revenue rose 27% YoY to UAH 7.2bn (USD 898mn) and EBITDA jumped by 73% YoY to UAH 391mn (USD 49mn). Nevertheless, given the company’s weak bottom line for the year, we are lowering our target price for the CEEN stock from USD 2.60 per share to USD 1.84 per share. The main changes in our DCF model for CentrEnergo are a decrease in its long¬run EBITDA margin from 15% to 12.5%, and a 1% rise in WACC to 17%, related to higher country risk as reflected in Ukrainian sovereign bond yields. The new target price implies an upside of 85%, and we therefore reiterate our BUY recommendation for the CEEN stock.
