Warsaw Stock Exchange: KOGENERACJA S.A. 1Q23 in line with preliminary

Comparative Valuation Analysis: Selena FM vs. Peers in the Construction Materials Manufacturing Sector

Kogeneracja repored 1Q23 final results with the following highlight:

â–  Revenues amounted to PLN 1111mn (vs. PLN 589mn year ago, in line with preliminary)

â–  EBITDA amounted to PLN 314mn (vs. PLN 140mn year ago, in line with preliminary)

â–  EBIT of parent company amounted to PLN 187mn (vs. PLN 26mn year ago)

â–  EBIT of EC Zielona Góra amounted to PLN 73mn (vs. PLN 66mn year ago)

â–  Net income amounted to PLN 214mn (in line with preliminary)

â–  Sales of electricity amounted to TWh 0.8 (+2% y/y)

â–  Sales of heat amounted to TJ 4276 (-5% y/y)

Our view: NEUTRAL

Company delivered result in line with preliminary, therefore today we expect neutral market reaction. The strong improvement was reported by the parent company with EBIT of PLN 187mn (vs. PLN 26mn year ago) which is due to strong revenues higher by 68% (revenues from electricity sales +88% y/y, revenues from heat sales +63% y/y) while OPEX increased “only” by 35% with cost of fuels higher by 17% y/y. We believe that in 1Q23 company was using coal purchased with relatively low prices and taking into account that PSCMI1 and PSCMI2 index increased in 1Q23 by 140% and 195% y/y, respectively, we believe that coal cost recognized in company’s financial statement will be increasing in the following quarters. The result of Zielona Góra came “only” 11% above 1Q22 levels.

We underline that company in 1Q23 delivered super strong results which visibly outperformed our 2023e estimates and such strong results should provide support to raise our 2023e estimates. Nevertheless, when assessing company’s results and estimating 2023e EBITDA, we should take into the account the results and guidance of heat segment of parent company PGE (in 2018/19/20/21 EBITDA of Kogeneracja accounted to 18/21/34/31% of EBITDA of heat segment of PGE, only in 2022 due to high fuel (gas) and CO2 costs PGE’s heat EBITDA amounted to PLN 39mn while Kogeneracja reported EBITDA 364mn). We underline that during 4Q22 conference PGE presented guidance for 2023 and expects decline of the results of heating segment due higher CO2 costs and higher fuel costs. However, in 1Q23, PGE reported EBITDA of heat segment of PLN 910mn (vs. PLN 39mn in 2023), which similarly to the results of Kogeneracja, came as a strong surprise. We believe that PGE, when providing the 2023 guidance (this guidance was published on March 23) knew about super strong 1Q23 results of heat segment and it is hard to believe that company will significantly change its guidance 2023e. But on the other hand to deliver this guidance, the company would have to record strongly negative results in the heating segment in the coming quarters, which is also hard to believe.

We underline that, when forecasting 2023e EBITDA for Kogeneracja, in the light of stabilization of gas prices, we took into account also guidance for heat segment presented by PGE. Right now, after the 1Q23 result, we see strong support to raise our 2023e EBITDA estimates, but to get more clue whether the 2023e results will be above or below 2022, we advise to wait for PGE’s 1Q23 conference call and updated 2023 guidance for heat segment.

Even if company will deliver super strong results in 2023e, taking into account dividend policy of PGE, we do not expect that this profits will be paid in a form of substantial dividends to company’s shareholders.

PGE’s 2023 outlook presented on March 23

Warsaw Stock Exchange: KOGENERACJA S.A. 1Q23 in line with preliminary - 1

Kogeneracja 1Q23 final results

Warsaw Stock Exchange: KOGENERACJA S.A. 1Q23 in line with preliminary - 2

Marcin Górnik

marcin.gornik@pekao.com.pl

GPW’s Analytical Coverage Support Programme 3.0

Comparative Valuation Analysis: Selena FM vs. Peers in the Construction Materials Manufacturing Sector

GPW’s Analytical Coverage Support Programme 3.0

The Warsaw Stock Exchange's (GPW's) Analytical Coverage Support Programme 3.0 supports investment firms in drafting analytical reports which are financed by GPW. The objective of the Programme is to improve the availability of research covering less liquid companies, facilitating investors' informed investment decisions based on a reliable independent source of issuer information. Eligible to participate in the Programme are companies listed on the GPW Main Market (other than WIG20 participants) and on NewConnect. The Programme covers up to 50 issuers.

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